In its effort to make it easier for to simplify agent licensing lawas across the states, members of the National Association of Insurance Commissioners (NAIC) unanimously adopted in October amendments to its Producer Licensing Model Act.The Kansas, City, Mo.-based organization approved the Model Act in January, and industry observers believe it's crucial to making it easier for carriers to sell insurance on the Internet (see "Dismantling the E-Commerce Walls," March).
The amendments to the Model Act include the following:
* Deleting Section 4(B)8 of the Model Act, which was intended to clarify the exemption of some customer service representatives from licensing.
* Adding a provision that allows states to define limited lines insurance.
* Adding a provision that creates a personal lines classification as a separate licensing category.
* Adding a provision that permits states to contractually outsource ministerial licensing activities to nongovernment entities.
If at least 29 states and territories do not approve uniform or reciprocal agent licensing laws by November 2002, the Gramm-Leach-Bliley Act calls for the formation of a National Association of Registered Agents and Brokers (NARAB) to oversee agent qualifications and licensing. Many in the industry believe NARAB would open the door to federal regulation.
Creating an impasse
"We determined that Section 4(B)8 was creating an impasse within the industry and would endanger the ability of states to pass the Model Act, potentially triggering NARAB," says George Nichols, Kentucky Insurance Commissioner and NAIC president.
Section 4(B)8 was being interpreted differently by different people in the industry, says Terry Vaughan, Iowa Insurance Commissioner. "The Model Act stated that customer service reps are not required to be licensed provided they do not otherwise engage in sales, solicitation or negotiation," she explains. "And everyone said, what does 'otherwise' mean?"
The National Association of Independent Insurers (NAII), Des Plaines, Ill., opposed the deletion of the Section 4(B)8, claiming the section eliminated the need for insurers to license customer service representatives whose duties were limited to responding to questions from existing policyholders about their policies.
On the other hand, the Independent Insurance Agents of America (IIAA), Alexandria, Va., was concerned that the section created a loophole that would allow nonlicensed individuals to sell insurance, says Jeff Myers, IIAA spokesperson.
"Given this provision was not necessary to satisfy the NARAB mandate, our members decided it should be deleted," NAIC's Nichols says.
Kentucky and New Hampshire have adopted the Model Act, and Missouri and North Carolina have adopted some of its provisions. At least 31 states will be considering it in upcoming legislative sessions.
The NAIC also is moving forward with its Accelerated Licensure Evaluation Review Technology (ALERT) program, which seeks to create a more uniform and efficient company licensing system.
Thirty-five states are accepting the Uniform Certificate of Authority Application, and the NAIC's goal is to have all 50 states, the District of Columbia and the four jurisdictions participating by the end of the year.
Currently, NAIC is identifying state-specific requirements to determine whether they are procedurally driven or driven by statute or regulation, says Cynthia Donovan, manager of securities and financial services operations for the Indiana Department of Insurance, Indianapolis.
The NAIC will consider adding state-specific requirements to the application if they would add value, and identify those that would not so states can take steps to make legislative changes if necessary, she says.
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