Senate Banking Subcommittee holds insurance regulation hearing

The U.S. Senate Banking Subcommittee on Securities, Insurance and Investment held a hearing recently titled “Streamlining Regulation, Improving Consumer Protection and Increasing Competition in Insurance Markets.”

Witnesses present at the hearing included:

 •  The Hon. Monica J. Lindeen, commissioner of securities and insurance and the Montana state auditor on behalf of the National Association of Insurance Commissioners (NAIC),

•  Jon A. Jensen, president of Correll Insurance Group and chairman of the Government Affairs Committee of the Independent Insurance Agents and Brokers of America (IIABA),

•  Scott Trofholz, president and CEO of the Harry A. Koch Co. of Omaha, Neb., on behalf of the Council of Insurance Agents and Brokers, and

 •  Baird Webel, a specialist in financial economics with the Congressional Research Service.

All of the association witnesses spoke primarily about the recently proposed National Association of Registered Agents & Brokers Act (NARAB II); Senate Bill 534, which aims to simplify multistate insurance licensing; and the changes it would implement. The Congressional Research Service noted that similar to legislation offered in the previous Congress, S. 534 would create “a nonprofit, private body whose members would be required to be state-licensed insurance producers, but who would also be able to operate across states without having licenses from the individual states.”

Witnesses Lindeen, Jensen and Trofholz spoke in support of S. 534, a bill sponsored by U.S. Sen. Jon Tester (D-Mont.), who stated: “Streamlining the licensing of registered agents and brokers while maintaining state regulation of the insurance industry will increase competition in the insurance market and better protect consumers. With the support of both the insurance industry and regulators, our bill will improve the licensing process and provide consumers with a better product at a lower price.”

Jensen made the following remarks in his testimony:

“IIABA believes the most efficient, effective and sensible way to address the licensing and marketplace access problems … is through targeted legislation at the federal level. Limited federal legislation can effectively remedy identified deficiencies in the current system, establish greater interstate consistency in key areas, and preserve day-to-day regulation in the hands of state officials. This pragmatic and politically feasible approach can be used on a compartmentalized issue-by-issue basis to address acknowledged problems and to establish uniformity and interstate consistency where necessary.

The NARAB II proposal would immediately establish the National Association of Registered Agents and Brokers, and provide agents and brokers with a long-awaited vehicle for obtaining the authority to operate on a multistate basis. It would eliminate barriers faced by agents who operate in multiple states, establish licensing reciprocity and create a one-stop facility for those who require nonresident licenses. The bipartisan proposal benefits policyholders by increasing marketplace competition and consumer choice and by enabling insurance producers to more quickly and responsively serve the needs of consumers.”

 Jensen went on to note:

“The NARAB II proposal would strengthen state insurance regulation, reduce unnecessary redundancies and regulatory costs, and enable the industry to more effectively serve the needs of insurance buyers.”

Trofholz also commented on the importance of the NARAB II legislation in his testimony:

“The inability of the states to fully implement licensing reciprocity and to make real progress toward uniform laws and regulations has been demonstrated repeatedly in the dozen years since The Gramm-Leach-Bliley Act (GLBA) enactment. The federal law put pressure on the states and resulted in real improvements in licensing processes, but the resistance to comprehensive change has stymied attempts to achieve comprehensive reform. As a result, brokers continue to face differing licensing obligations across the states, imposing administrative and financial burdens that affect not only brokers, but consumers as well. This is why the Council – as well as all other major stakeholders, including the state insurance regulators represented through the NAIC – support enactment of S. 534, the NARAB II legislation.

“The licensing of insurance agents and brokers across the country is unnecessarily burdensome, inefficient and costly. The states have worked for years to devise a system to overcome the obstacles created by 56 different jurisdictions seeking to do it their own ways, but for understandable reasons, the political dynamic in those jurisdictions has precluded uniformity. The NARAB provisions of the Gramm-Leach-Bliley Act, enacted in 1999, were the first step in the process toward creating a sensible, streamlined system. Meanwhile, the pace of interstate activity in the insurance marketplace has outstripped the pace of reform efforts in individual states. The NAIC leadership is to be commended for embracing the administrative simplicity that would be achieved through the enactment of S. 534. We strongly believe this legislation is needed to finally create a state insurance producer licensing system that works for today’s agents and brokers – and today’s marketplace.”