By Cyril Tuohy
It’s off to the U.S. Senate — finally — for the National Association of Registered Agents and Brokers Reform (NARAB) Act of 2013, which cleared a key committee June 6. You could almost hear the brokerage and financial advisor community leap for joy — or was it a sigh of relief?
“It’s less red tape to be licensed in multiple states,” Jill Hoffman, assistant vice president for federal government relations with the National Association of Insurance and Financial Advisors (NAIFA), said. “We know that multistate licensing is a hassle.”
“This effort has been waged for decades and is now closer than ever to fruition,” said Ken A. Crerar, president and chief executive officer of the Council of Insurance Agents & Brokers, which represents the nation’s most powerful commercial insurance and employee benefits brokers.
As always, though, there was some last-minute drama courtesy of Sen. Tom Coburn, R-Okla., a fervent states-rights supporter, who proposed to amend the legislation by allowing states to opt out of approval from the National Association of Registered Agents and Brokers, an independent board to oversee producer licensing reciprocity among states.
The Coburn amendment was defeated 18-4.
Another amendment, proposed by Sen. Elizabeth Warren, D-Mass., former chairwoman of the Congressional Oversight Panel for the Troubled Asset Relief Program, requires that the members serving on the board have “demonstrated expertise and experience” with licensing property/casualty and life and health agents.
Her amendment, which strengthens the bill by effectively raising the bar for NARAB board appointees, won committee backing, and the bill — S-534, also known as NARAB II — sailed through the Senate Committee on Banking, Housing and Urban Affairs by unanimous vote.
“I’m pleased the banking committee agreed to this amendment to improve the national insurance licensing bill,” Warren said.
The bill, sponsored by Sen. Jon Tester, D-Mont., and Sen. Mike Johanns, R-Neb., along with 22 co-sponsors, now heads to the Senate for a full vote.
“Barrier to passage has always been the Senate, and we have made the single biggest stride today to the passage of NARAB,” Hoffman said in an interview with InsuranceNewsNet after the bill had been passed by the committee.
With the next stop the Senate chamber, “The goal is to try to get this on the floor as soon as possible and get Mr. Coburn’s concerns addressed,” Hoffman also said.
A House version of the bill, HR-1155, sponsored by Rep. Randy Neugebauer, R-Texas, and Rep. David Scott, D-Ga., also was introduced earlier this year. Because the House has passed previous versions of the producer licensing reform bill on two occasions, the House version isn’t expected to face any significant opposition there, Hoffman said.
National Association of Insurance and Financial Advisors President Bob Smith said the bill not only would help ease multistate licensing burdens, but would help advisors “maintain important relationships with clients and ultimately serve consumers better.”
In addition to NAIFA and the CIAB, several other powerful insurance agent and broker groups, along with big insurance underwriter organizations and the National Association of Insurance Commissioners, which represent state regulators, backed the bill.
The Insured Retirement Institute, in a statement after the vote, also praised passage of the bill, calling it an “important step forward” for the “efficient and cost-effective licensing of thousands of financial advisors across the nation.”
NARAB II will create a national clearinghouse for insurance agents and brokers to obtain approval to operate in multiple states so that agents only have to pass licensing requirements in their home state and once for NARAB.
Financial advisors now have to earn separate licenses for every state in which their clients are located, and 80 percent of NAIFA members say they have lost clients who moved to states in which they were not licensed.
The bill also establishes a board of directors dominated by state regulators who will establish standards for membership that meet or exceed the requirements of any state so as to achieve “full reciprocity” with regard to nonresident producer licensing.
This bill is considered a reform to a provision in the Gramm-Leach-Bliley Act of 1999 to create a new organization called the National Association of Registered Agents and Brokers. The organization never came into being, however, because many states — 35 in all — had met nonresident producer licensing reciprocity standards.
But several big states have not yet become reciprocal because of so-called desk-drawer rules, Hoffman said, and many agents still felt shut out of the marketplace leading the industry to push for legislative reform known as NARAB II.
A bill with such overwhelming support is almost a sure bet for the president to sign into law.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].
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