If we draft a producer licensing manual to address inequities in state laws and procedures, maybe we can push regulators to actually act on something
By Scott Sinder and John Fielding
The NAIC, led by President Walter Bell, Alabamas insurance commissioner, has pledged to focus on producer issues, saying producer licensing and related issues are among his top priorities.
Unfortunately, it is unclear exactly what Bell and the NAIC intend to do or when they plan to get started. There has been talk of amending the Producer Licensing Model Act, pressuring recalcitrant states to toe the reciprocity/uniformity line on licensing and devising an accreditation program that includes licensing (similar to the NAICs financial solvency accreditation program). But the truth is, we just dont know what is being considered. We do know, however, that action is needed.
Despite the progress of the last decade, even state regulators acknowledge that producer licensing reform remains far from finished:
- Although many states have implemented all or part of the NAICs model producer licensing law, severalincluding mega-markets California and Floridahave not shown any intention to move toward producer license reciprocity. Others have not adopted all of the key non-resident reciprocity provisions of the model law.
- Huge hurdles remain in many states that have adopted the NAICs reciprocity language. Interpretation and enforcement is all over the board. Most states impose additional business rules that must be honored for a non-resident to be licensed.
- Multiple layers of licensure (individual, agency, corporate registration) in many states continue to prolong the process, potentially violating the Gramm-Leach-Bliley Act.
- Despite the NAICs attempts to push uniformity, resident licensing requirements continue to differ, from pre-licensing and continuing education to lines of authority to fingerprinting to renewals.
So, there is still a great deal of work to be done and times a-wastin while we wait (and wait) for the NAIC leaderships plan. With the year half over and most state legislative sessions winding down, there might not be time to actually get anything accomplished. Yet we continue to push the NAIC and state regulators for action to fix the problems that continue to burden producers seeking licenses.
One of the projects with some potential to improve things is an industry-initiated endeavor to develop a producer licensing manual. The Council has been consulting with other producer and carrier groups to draft a handbook that the state insurance regulators could look to for guidance. The handbook is a work in progress. The goal is a single resource that covers producer licensing from pre-licensing education to license revocation (and everything in between).
The manual, which will serve carriers and producers as well as regulators, has the potential to fix some of the inconsistencies in state implementation of licensing laws and rules. It will not replace the need to closely examine the NAIC Producer Licensing Model Act and individual state laws, nor will it replace the need for the commissioners to pressure colleagues and their staffs to implement and correctly enforce existing laws based on the model act. But the handbook can get at the low hanging fruitthe relatively straightforward licensing issues that differ among the states, causing headaches and driving up compliance costs.
We anticipate the manual will address issues of interpretation and administrative issues that have no statutory or regulatory basis. These dos and donts may include:
- The timing of examinations and application submissions (as some states require exams before submitting an application and some after);
- Regular updating of exams to ensure they reflect current law;
- Ensuring that pre-licensing education courses have some relationship to the material covered in the exams;
- Fair exam pass rates that do not intentionally mandate a certain number fail, as some have alleged;
- Removing unnecessary obstacles to timely and convenient re-testing for individuals who do fail the exam;
- Streamlining the process by doing such things as scoring exams quickly and making fingerprinting easily available;
- Providing interpretations of the model act that explain how the drafters intended the language to be implemented by states; and
- Including a complete set of documents related to producer licensing. This includes the act, an NAIC FAQ document, NAIC bulletins and all uniform applications.
At this point, the manual is an industry product. Although we are working with a staff liaison from the NAIC, they have not given it their final blessing or been involved in developing the content. Regulators at a recent meeting of the NAICs Producer Licensing Working Group appeared to resist the manual. So, like everything involving the states, this will be an uphill struggle, but we believe there are some tangible benefits that can be gainednot the least of which is our ability to use the handbook in discussions with the states when rogue regulators take action conflicting with manual procedures and interpretations.
We welcome your thoughts and suggestions on how we address issues in the handbook. This is a relatively straightforward way to push for change. The more information we have, the better. Sinder is CIAB general counsel. firstname.lastname@example.org
Fielding is of counsel at Steptoe & Johnson. email@example.com