John L. Van Osdall, chairman of the Washington-based Council of Insurance Agents and Brokers, called on federal lawmakers to consider a self-regulatory organization approach to licensing reform, whether as part of optional chartering or other interim reforms Congress may consider.

"The Council believes that using a supervised SRO to regulate industry activities might result in significant efficiencies and savings for consumers without diminishing the consumer protections in place today," he said in his testimony.

He added, however, that given the excessive costs of producer licensing, the Council is open to anything that makes the system more efficient.

Thomas B. Ahart, president of the Alexandria, Va.-based Independent Insurance Agents and Brokers of America, noted that IIABA is developing a proposal that would keep producer licensing with the states, subject to federal rules aimed at improving efficiency. It will be based on three principles and apply to both producers and underwriters.

? The first principle, he said, is that every agent, broker and insurer would be subject to only a single state regulator for licensing determinations, solvency regulation, financial audits, corporate transaction reviews, and corporate governance requirements. He said Congress could preempt such controversial state laws as countersignature under this principle.

? Second, he said, state review of policy forms would be limited to 30 days, and rating laws essentially eliminated for any line so long as there is a "competitive" marketplace.

? Third, he said, is the creation of incentives for states to create compacts to streamline the market conduct examination process, although no substantive consumer protections would be eliminated or displaced.

Mr. Van Osdall said he is very skeptical that the states can achieve reform without prodding from Congress. He noted that one part of the Gramm-Leach-Bliley Act called for creation of a National Association of Registered Agents and Brokers unless a certain number of states achieved specified producer licensing reform in three years.

While 46 states have enacted some type of reform since passage of GLB, there are some significant variations in the state laws, and the two largest states--New York and California--have not enacted legislation designed to meet the NARAB threshold at all, he noted.

He said that the National Association of Insurance Commissioners will soon certify that a majority of states have met the NARAB threshold, thus averting creation of NARAB, even though there is still a lot of work to be done to reach true reciprocity and uniformity in all jurisdictions. "We find this to be troubling, given the threat of federal intervention that was implicit in the NARAB provisions of Gramm-Leach-Bliley," he said.

Mr. Van Osdall added that the Council recently completed a study on future regulatory options for the insurance industry, which found that all of the regulatory modernization efforts put forward by the NAIC in the past several years have been the direct result of major external threats--whether of federal intervention or market dislocation. There is no guarantee, he said, that the state-based system will adopt further meaningful reforms without continued external threats to its jurisdiction.