A Senate hearing on legislation that would make it easier to obtain licenses to sell insurance in multiple states has pushed the bill into high gear in Congress.
Bills have been introduced in the House and Senate that would create the National Association of Registered Agents and Brokers as a clearinghouse for nonresident-insurance-agent and broker licensing. Financial advisers who already are registered in one state could join the organization to become licensed to sell insurance in all other states.
Currently, advisers must make those applications state by state.
That situation hamstrings Jason Hochstadt, acting chief executive of Jedi Management Inc., a registered investment advisory firm.
He also runs Lifeco Associates Inc., an insurance broker.
Mr. Hochstadt has insurance licenses in Florida, New Jersey and New York. If he were to get referrals in California and Pennsylvania, for example, he would have to go through a potentially long application process in each state.
“It's become a bit of a logistical nightmare,” Mr. Hochstadt said.
When he pursues a new client in a new state, the licensing requirements force him to wait before selling a policy, he said.
RELIEF ON THE WAY
“Now you've got to explain to [a potential client] why we have to delay, why we can't place something for them right now,” Mr. Hochstadt said. “We may lose business.”
Relief may be on the way fairly quickly — at least by legislative standards.
The House passed NARAB legislation in the previous Congress, but it died in the Senate last year.
This year, the bill has been re-introduced in the House by Rep. Randy Neugebauer, R-Texas, and Rep. David Scott, D-Ga. There is also a Senate version, authored by Sen. Mike Johanns, R-Neb., and Sen. Jon Tester, D-Montana.
After a hearing on the bill before the Senate Banking Subcommittee on Securities, Insurance and Investment last Tuesday, Mr. Tester said that he hoped it would get a vote by the full committee without the need for another hearing. It would then head to the Senate floor.
“There's solid ground to move this forward,” said Mr. Tester, chairman of the subcommittee. “There's not a lot of opposition to this bill.”
But some consumer advocates are wary. They argue that the NARAB would essentially be a self-regulatory organization.
“You have a nongovernmental entity carrying out governmental responsibility,” said Birny Birnbaum, executive director of the Center for Economic Justice.
Opponents also cite the fact that the 13-member NARAB board would consist of eight state insurance commissioners and five industry representatives — with no consumer representatives. In addition, it isn't clear where insurance customers ultimately would go to pursue claims against the organization.
“Where's the accountability?” asked Robert Hunter, insurance director at the Consumer Federation of America. “It's out there in the ether.”
Supporters say that the NARAB would increase competition and efficiency in the insurance market, saving advisers and brokers time and money while giving consumers more product choice.
“This is bipartisan, common-sense legislation that really breaks down the red tape,” said Lee Covington, senior vice president and general counsel at the Insured Retirement Institute.
State regulators also are on board.
Monica Lindeen, Montana commissioner of securities and insurance, told lawmakers at last week's hearing that the licensing body would serve only an administrative function and “leaves [insurance] regulation in the hands of state officials.”
“It would have no effect on my ability to protect consumers,” she said.
The NARAB would conduct federal background checks on insurance agents before they become members. It would charge a fee, which hasn't been set.
Individual state fees would still apply.
Juli McNeely, president of McNeely Financial Services Inc., anticipates that the NARAB will use the most-stringent licensing requirements from the various states when adopting a national standard.
“It's a positive for consumers, and it would be a positive for agents,” said Ms. McNeely, who also is the secretary of the National Association of Insurance and Financial Advisors.
Ms. McNeely is licensed in Arizona, Maryland, Minnesota and Wisconsin. She is also looking into Illinois and Nevada.
“It becomes pretty complex when you have multiple states that clients are located in,” Ms. McNeely said.
A recent IRI study showed that advisers spend 22 hours annually dealing with license renewals and continuing education related to selling annuities. Similar requirements for selling securities mandate 15 hours.