January NAIFA GovPod Explores the OFC

Listen to NAIFA Trustee Russ Smith, CLU, ChFC, CFP, CSA, and Director of Federal Relations Jill Edwards discuss the pros and cons of the proposal to create an optional federal regulator for the insurance industry. Released January 1, the new NAIFA GovPod provides some insight into the controversial initiative.

This month’s GovPod is the first in a series of podcasts on the issue of insurance regulatory reform (IRR). Please stay tuned for the February GovPod, which will discuss NAIFA’s extensive involvement in state-based efforts to address regulatory problems that impact producers.

To listen to this month’s GovPod on the optional federal charter (OFC), visit www.naifa.org/advocacy/podcasts.cfm and select the play button. Options for downloading or printing the transcript are also available on the website.

How the Optional Federal Charter Proposal Affects Agents

A proposal to create an optional federal insurance charter (OFC) for life and property/casualty companies and agents has been introduced in both the U.S. House of Representatives and the U.S. Senate. As written, the National Insurance Act (NIA) would give insurance agents the choice to remain licensed in the state regulatory system or "opt" for a national, federal license that would be valid in all 56 U.S. insurance jurisdictions (including the states, the District of Columbia and five U.S. territories). The cost for such a license, as well as the establishment of continuing education standards, would be determined by the newly created Office of National Insurance (ONI).

Elements of the proposal that impact agents include:

• With a federal license, the agent may sell insurance in any state on behalf of federally licensed insurers and/or state licensed insurers—including state-licensed health insurance companies (there is no effort to include health insurance companies in the federal charter).

• Nationally licensed agents would still be required to pay taxes in their home states.

• For agents who choose to remain state licensed, they may still sell insurance on behalf of state or federally licensed insurers doing business in their states.

• For agents who work primarily for a single carrier, the bill requires federally licensed insurers (National Insurers) to supervise the activities of their federally licensed agents. In addition, federally licensed insurance agencies (National Agencies) would be required to supervise their employees engaged in the sale of insurance.

• The ONI would not have authority over agents that choose to remain state licensed.

NAIFA’s Position on Optional Federal Charter:
NAIFA is not ready to take a position on the House and Senate versions of the National Insurance Act of 2007. NAIFA remains open to considering all proposals that improve the regulatory landscape for NAIFA members. Specifically, NAIFA’s priorities are to:

• Streamline agent licensing and continuing education requirements so that the rules do not vary from state-to-state.
• Improve the speed-to-market of life insurance and related products.
• Ease the regulatory burdens on agents who are also registered through the SEC and FINRA.

For more information please visit the insurance regulatory reform section of NAIFA’s website at www.naifa.org/advocacy/irr.

NAIFA Staff Contact: Jill Edwards, director, federal relations, 703-770-8158 jilledwards@naifa.org.