By David M. Eppstein
Director of State Affairs
PIA National

PIA has been working with the National Association of Insurance Commissioners (NAIC) and the National Conference of Insurance Legislators (NCOIL) to improve the process our members must go through to obtain a non-resident license.  Both organizations addressed this issue extensively at their summer meetings and we would like to thank all of those who sent in your experiences with various state insurance departments.  Please continue to tell us about your efforts to obtain non-resident producer licenses, whether you had a positive or negative experience.  We will continue to share this information with our regulators and legislators.  They have assured us that they are aggressively targeting states that are not living up to their commitments to modernize their licensing requirements.  We have made great progress over the years in improving the licensing system, but there is still more progress to be made.  By working together, we can assist the states to make the licensing process uniform nationwide.

Critical Issue for Main Street Agents

Addressing the lack of uniformity in the licensing system is a critical issue for our members.  In today’s marketplace, many agencies are increasingly operating in multiple jurisdictions.  The lack of uniformity in the licensing process is costly and time-consuming for agents.  Further, the often confusing and disparate procedures mean increased chances of inadvertent violations.

This issue is just as important for agencies that operate within one state.  One of the main reasons is that the large insurance companies and banks pushing for federal insurance regulation point to the inefficient state licensing system as evidence that the states simply can not get their act together and therefore a federal takeover is required.

As you are well aware, a federal insurance regulatory system would be a disaster for all of us, but would have a particularly devastating effect on the smaller agencies that would be driven from the marketplace by large corporations operating with a single national license.

Legislators Address Producer Licensing

On July 20, NCOIL held a special State-Federal Relations Committee meeting to address producer and company licensing in the post Gramm-Leach Bliley Act (GLBA) era. The discussion focused on achieving the goal of uniformity in the non-resident licensing process. It also aimed to raise awareness and implement solutions to the problem of states’ noncompliance with the Producer Licensing Model Act (PLMA).

During the discussion, we made it clear that PIA is opposed to federal regulation, we support the goal of uniformity and will work with NCOIL, the NAIC, and other interested parties to steer states toward compliance with GLBA.  We let the legislators know that this is a very high priority issue for our members.

This was a critical meeting for us, because the legislators were largely unaware there was a problem with the producer licensing system.  Because almost every jurisdiction passed the PLMA, the legislators thought their job was finished.  However, as we pointed out, many states are interpreting this law in an inconsistent manner, thereby interfering with the goal of national uniformity.

Regulators Committed to Producer Licensing Uniformity

We are excited to see this resurgence in interest to address producer licensing at both the NAIC and NCOIL.  The NAIC’s stated long-term goal is the “implementation of a uniform, electronic licensing system for individuals and business entities that sell, solicit or negotiate insurance.”

During the inaugural meeting of a working group convened by the NAIC, PIA National President Donna Pile addressed agent concerns regarding producer licensing. The first meeting of the NAIC/Industry Producer Licensing Coalition showed real progress toward real solutions. NAIC leadership is considering undertaking a process of re-certifying states on their GLBA requirements. Before this process begins, PIA along with other interested industry participants, plans to provide input on what uniformity standards are most important and whether we should add standards to the current list.  This is where your input will play a key role in this process.

This meeting was the first in what will be a series of meetings between the regulators and industry representatives.  PIA will be participating throughout the process and we look forward to being able to report tangible progress soon.

Foreign Corporation Filings for Insurance Producers

From our point of view, we cannot solve all the issues surrounding licensing uniformity until we address the relatively new problem of secretaries of state inserting themselves into the insurance licensing process. The main impediment stems from a new approach taken by several states that forces a producer to file for a foreign corporation license. We believe these requirements violate the GLBA’s uniformity provisions and in many cases, state statutes.  During our meeting with the regulators, we provided them with a detailed outline of our concerns surrounding this problem.

In addition to the foreign corporation issue, we are working with the legislators and regulators to address several other issues related to licensing, such as the ancillary business exemption of the PLMA, individual versus entity non-resident licenses, agent training and education, and fingerprint and background checks.  With your help, we will successfully modernize the state regulatory system while also keeping federal regulator proposals at bay.  It’s a tall order, but we’re up to the task!

David M. Eppstein davidep@pianet.org is Director of State Affairs for PIA National.

This article originally appeared in the September 2007 issue of PIA Connection.