The high stakes and dramatic flair of the race to renew the Terrorism Risk Insurance Act all but overshadowed the inclusion of a smaller, less controversial provision in the law—language that would establish a national licensing board for insurance producers.
Pending approval from the White House, NARAB II effectively creates the National Association of Registered Agents and Brokers. The group would set up its own standards that insurance producers would have to meet in order to do business in other states—a departure from the current system, which asks producers to meet requirements in their home state and every other state in which they wish to operate.
Supporters of the legislation say NARAB would simplify licensing procedures and reduce costs. According to an analysis from the National Association of Independent Financial Advisors, producers currently spend about 29 hours a year and $225 in licensing costs in order to meet requirements.
Despite popular support for the board’s creation, however, it has been a long fight to its passage today—by some counts, 25 years. That long delay may have left some producers hazy on the details, wondering what happens next and what they are required to do.
According to language in the law, President Barack Obama will have up to 90 days after signing the bill to appoint members of NARAB’s 13-member board. The board will include 8 insurance commissioners and five industry leaders with professional expertise in producer licensing, and will develop guidelines for national licensing.
Producers are not required to gain licensing through NARAB. Membership is entirely optional, and those who prefer to obtain their licenses state by state may continue to do so.
That’s an important point, considering many producers fear what a national licensing board might mean for the future of federal government involvement in their businesses.
“There is always going to be some fear about the federal government taking over with any piece of legislation, but we have worked very hard to maintain proper separation,” said Jill Hoffman, NAIFA’s assistant vice president, federal government relations. “Membership in NARAB is entirely voluntary and there is nothing requiring anyone to join.
“One of the biggest challenges we had in bringing this legislation along to where it is today was achieving a balance between the interests of state regulation and needed national efficiencies. We’ve achieved that.”
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