When President Obama signed the National Association of Registered Agents and Brokers legislation (“NARAB II”) into law on January 12, 2015, insurance producers operating in multiple states finally realized their long sought goal. NARAB II is the next step in streamlining multi-state licensing for insurance producers and is intended to drastically simplify that process. This article provides an overview of multi-state license under NARAB and the role of state Departments of Insurance going forward.
The new law authorizes the creation of the National Association of Registered Agents and Brokers (“NARAB”) which will operate as a non-profit membership based corporation. NARAB’s role will be to establish the procedures and mechanism to enable individuals and agencies to simultaneously satisfy the licensing requirements in multiple non-resident states. An insurance producer or agency is eligible to become a member of NARAB if they have an active license in their home state and the license is not subject to suspension or revocation. NARAB applicants will be required to complete a criminal background check and NARAB may deny membership based on criminal history. States will have an opportunity to object to a producer becoming a member of NARAB. Any other qualifications for membership can be no less protective to the public than contained in the NAIC’s Producer Licensing Model Act. Membership is conditioned on the producer satisfying continuing education requirements. The NARAB continuing education requirements are required to be similar to the requirements in a majority of states. NARAB members will receive credit for the continuing education they complete in their home state and are not required to satisfy NARAB’s continuing education requirements if the requirements are equivalent to the home state requirement. States, other than the producer’s home state, are prohibited from imposing a continuing education requirement on a NARAB member.
Once a NARAB member identifies the states where it desires to be licensed and pays the required licensing fees, then the agency or producer is authorized to operate in the designated states as if it was a foreign producer licensed in the state. It is intended to be that simple and quick. Membership in NARAB will be valid for two years. NARAB is expected to be funded through the collection of membership fees.
NARAB has the authority to place a member on probation or suspend or revoke its membership if the member is found to violate certain standards of conduct, such as: failing to meet the membership criteria or other standards established by NARAB; being subject to disciplinary actions by a state, including suspension or revocation of a license; or being convicted of a crime that would have resulted in denial of membership at the time of application.
NARAB is required to become operational by the later of January 2017 or within two years after the date of NARAB’s incorporation. NARAB will be governed by a thirteen member board of directors. The Board will be responsible for establishing and operating NARAB. Directors will be appointed by the President and approved by the Senate. The board will include eight state insurance commissioners and five private sector representatives.
Role of State Insurance Departments of Insurance
State Departments will continue to be responsible for regulating the business of insurance. However, Departments of Insurance are not permitted to restrict the licensing or impose additional requirements on members of NARAB. Agency members of NARAB are not required to register with a Secretary of State as a foreign corporation. However, NARAB members are not exempt from state oversight and regulation. State Departments of Insurance will continue to enforce state laws related to unfair trade practices, consumer protection and generally regulate the business of insurance within their jurisdictions. This would include limiting, suspending or revoking an agent’s ability to do business if the producer or agency was found to be violating state law or regulatory requirements (regardless of membership in NARAB).
NARAB is required to maintain a process to receive consumer complaints. It will not investigate the complaints; instead, complaints will be referred to Departments of Insurance who are required to report the results of their investigation to NARAB.
A huge amount of work remains to be completed to make NARAB operational and there will be substantial industry involvement in that process. NARAB II is not a revolutionary change in the regulation of insurance since it preserves the states’ role in regulating, if not directly licensing, producers within their borders. Once NARAB is fully operational, it should be a simple and straightforward process for agents and agencies to become licensed throughout the United States or within a subset of the states in a quick and efficient manner. NARAB II is a significant victory for multi-state producers who have been clamoring for a simple solution for multi-state licensing for almost 20 years. NARAB II continues the march towards greater federal involvement in the business of insurance and is the latest example of increased federal interest in the regulation of the insurance industry.