The embattled legislation to establish the National Association of Registered Agents and Brokers (NARAB) passed the Senate yesterday in tact, surviving a challenge in the form of an amendment that would have allowed states to opt out of participation in the national licensing program for independent insurance producers.
The amendment, proposed by Sen. Tom Coburn of Oklahoma, was meant to make the legislation more “state friendly.” NARAB proponents like Joel Wood with the Council of Insurance Agents and Brokers, however, opposed the motion.
“NAIC and individual insurance commissioners have been very supportive of the legislation, but there’s no guarantee state legislatures or governors will go along,” Wood, CIAB’s senior vice president of government relations, said. “There’s a great history in our industry of many states feeling that their system is superior, and it’s not difficult to envision states—many of them bigger states—deciding to opt out of the NARAB construct.”
The result would be that “the whole thing never really gets off the ground,” Wood said.
NARAB has already encountered difficulty securing passage in Congress, and its current incarnation—as a separate provision in legislation delaying expected flood insurance rate hikes—is facing scrutiny from the Obama administration.
The White House expressed “constitutional concerns” regarding NARAB, particularly over the requirement that eight of the 13 NARAB board membership positions be occupied by state insurance commissioners. The provision “impermissibly limit[s] the scope of the President’s appointment power,” the administration said.
Wood expressed frustration at the delays NARAB has experienced, saying “this is the biggest no-brainer on earth, but it’s hard to pass because it’s very difficult to get oxygen in Congress.”
NARAB has widespread support in the industry, including from CIAB, the Independent Insurance Agents and Brokers Association (IIABA), the National Association of Insurance Commissioners (NAIC) and the National Association of Insurance and Financial Advisors (NAIFA).
To those who feel NARAB represents more unwelcome government encroachment on the insurance industry, Wood pointed out that producers who operate in multiple states are not required to go through NARAB to obtain a multi-state license.
“Nothing compels you to go to NARAB. It’s completely optional,” he said. “If you want to be licensed to sell insurance in 40 different jurisdictions, you’re free to do that on a state-by-state basis. Honestly, I think in some places, that will be the most attractive option.”
However, because the nature of the insurance industry is “so interstate,” Wood believes the board that would be established by NARAB is the ideal solution to differing state licensing procedures.
The bill itself passed the Senate yesterday, moving onto consideration by the House of Representatives. The House has expressed reservations about flood provisions in the bill, which may stymie NARAB’s progress, but Wood promised industry advocates will continue to fight on “multiple legislative fronts.”
