Over the past 15 years, state insurance regulators have made significant progress in simplifying the producer-licensing process, thanks to advances in technology and the establishment of the National Association of Registered Agents and Brokers (NARAB). NARAB aims to streamline insurance producer licensing in the United States, providing a one-stop mechanism for accessing nonresident markets while maintaining state market regulatory authorities and consumer protections.
Why is Producer Licensing Important?
People who wish to sell, solicit, or negotiate insurance in the United States must obtain a license as a “producer.” This term includes insurance agents and brokers who comply with various state laws and regulations. With over 2 million individuals and more than 236,000 business entities licensed to provide insurance services in the United States, state insurance departments play a crucial role in protecting consumer interests.
The Journey to Uniformity and Reciprocity
Traditionally, each state had its own licensing requirements, forcing producers licensed in one state to fulfill separate nonresident licensing requirements in others. This resulted in significant time and monetary costs for all parties involved. To address this issue, the federal Gramm-Leach-Bliley Act of 1999 (GLBA) mandated state reforms to streamline producer licensing.
However, if the GLBA’s reciprocity or uniformity standards were not met by at least 29 jurisdictions by November 2002, the act required the creation of NARAB. In response, the NAIC established the NARAB Working Group in 1999 to help states comply with GLBA’s provisions. The NAIC also developed the Producer Licensing Model Act (#218) to assist states in achieving reciprocity.
By 2007, the NAIC conducted a national producer-licensing assessment and published the “Producer Licensing Assessment Aggregate Report of Findings.” This report revealed that all 35 previously certified states remained in compliance with reciprocity standards, while additional jurisdictions became eligible for certification.
National Insurance Producer Registry (NIPR)
To further promote uniformity, the NAIC created the National Insurance Producer Registry (NIPR) in 1996. As a non-profit affiliate, NIPR serves as a national repository for producer-licensing information. It streamlines and modernizes the producer-licensing process by tracking ongoing licensing changes from all 50 states, Puerto Rico, the District of Columbia, and the U.S. Virgin Islands.
Introducing NARAB II
Despite the progress made in improving uniformity and streamlining nonresident producer licensing, some major markets have remained non-reciprocal. To address this issue, the National Association of Registered Agents and Brokers Reform Act of 2015 (NARAB II) was enacted.
NARAB II allows licensed insurance producers in their home state to sell, solicit, or negotiate insurance in every other state in which they intend to do business. This act established an independent non-profit corporation, NARAB, governed by a 13-member board consisting of state insurance commissioners and insurance industry representatives.
Producers interested in becoming NARAB members must meet certain criteria, including home state licensure, passing a criminal background check, and paying membership fees. Once accepted, producers can engage in producer activities in the jurisdiction, provided they are licensed for those lines of business in their home state and pay the respective licensing fees.
FAQs
Q: Is membership in NARAB mandatory for insurance producers?
A: No, membership in NARAB is entirely optional and voluntary for insurance producers.
Q: What powers does NARAB possess in terms of enforcement?
A: While NARAB has some disciplinary enforcement powers, state regulators will continue to regulate marketplace conduct, oversee producer actions, investigate complaints, and take action against those who violate the law.
Conclusion
Thanks to ongoing efforts and the implementation of NARAB II, the producer-licensing process for insurance services in the United States is becoming more streamlined and efficient. NARAB facilitates uniformity and reciprocity among states, making it easier for insurance producers to operate in multiple jurisdictions without unnecessary burdens. As the industry continues to evolve, NARAB remains a valuable resource for enhancing market accessibility while preserving consumer protection and state regulatory authorities.
