The battle over whether to allow Uncle Sam to directly regulate the insurance business via an optional federal charter has split the agent/broker community wide open.
It's not news that the two most powerful producer groups–the Council of Insurance Agents and Brokers, and the Independent Insurance Agents and Brokers of America–are at odds, with CIAB a pioneer in the federal oversight campaign and the Big I a longtime backer of state regulation.
It was CIAB that first proposed a self-regulatory organization called the National Association of Registered Agents and Brokers. NARAB was stillborn despite being included as a failsafe in the 1999 Gramm-Leach-Bliley law, after enough states got their act together on uniformity in producer licensing to avoid its creation.
Thus, how ironic that Big I resurrected the NARAB idea–as an alternative to federal oversight. IIABA is desperate to head off any federal charter initiative, which appears to be gaining momentum. (Momentum being relative–while Congress works at a snail's pace, it beats the tortoise-like speed of the National Association of Insurance Commissioners.)
As reported by our Washington Editor, Dave Postal, IIABA CEO Robert Rusbuldt–in a Sept. 20 op-ed piece in The Hill, a Capitol Hill publication–included NARAB as part of a “vigorous, but targeted” reform of state regulation.
Mr. Rusbuldt said NARAB would “give agents and brokers a choice between the current state-by-state licensing system and a national licensing portal,” adding that producers “comfortable with the current system and those licensed in one or a couple of states could choose to remain licensed in the traditional manner with no outside interference.”
However, a splinter agent group issued a sharp counterpoint in the same publication. In an Oct. 11 article, Peter Ludgin, executive director of Agents for Change, dismissed “NARAB-II” as a “band-aid solution.”
“Today, some of the largest markets are not fully participating in NARAB, many states are not truly reciprocal, and it has done little to fix agency licensing problems,” he wrote, calling an optional federal charter “the right fix.”
He said an OFC would “promote competition. It may lower prices. And it will be a boon to consumers. An OFC is the right policy prescription for the 21st century.”
My first reaction was, who the heck are Agents For Change? But then I took a step back and thought, fair is fair–if there is a group of agents out there determined to get a federal charter, let them have their say.
However, I tend to side with Big I on this. It seems to me their position is a reasonable compromise.
If you had a federally mandated NARAB, every state would have to get on board–which would address the uniformity challenge raised by Agents For Change, while keeping most basic regulation local. It would be even better if the initiative could be expanded to cover licensing of insurance and reinsurance carriers.
Indeed, the broader SMART Act–in which the federal government would set regulatory standards for the states to implement–would be a natural extension of the NARAB concept.
Like the Big I, I am keeping an open mind. (IIABA wouldn't have been caught dead endorsing any national regulatory scheme a few years ago.) Their position appears to be evolving, and mine is open to sound argument as well.
What do you make of this battle? Would a national licensing agency run by the industry relieve the need for an optional federal charter? If not, why not? File your comments on my blog.
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