NAIC Assesses State-By-State Producer Licensing Regulation

The National Association of Insurance Commissioners recently unveiled a study of the progress made in modernizing producer licensing regulation over the past 10 years.

The NAIC Producer Licensing Assessment reviews agent licensing rules across the country and points to successes in streamlining licensing procedures as well as areas where improvement is still needed to bring uniformity and reciprocity to the state-by-state licensing system.

The assessment project was conducted in conjunction with the NAIC/Industry Producer Licensing Coalition – a group of insurance regulators and industry organizations of which NAIFA is a member.

The assessment’s goals were to determine whether states continue to meet the licensing reciprocity requirements imposed by the Gramm-Leach-Bliley Act (GLBA), the states’ progress in complying with the NAIC’s uniform standards for resident licensing, and the areas states must address to achieve greater uniformity and reciprocity in the agent licensing system. To conduct the assessment, multiple teams of licensing regulators and NAIC staff conducted site visits to the insurance departments in every state, D.C. and Puerto Rico over a three-month period.

The assessment found the following areas of improvement in agent licensing in recent years, among others:

• 43 states satisfy the GLBA reciprocity mandate, which allows reciprocal licensing of non-resident agents.
• All states report their producer licensing information to the NAIC’s centralized State Producer Licensing Database, which facilitates electronic non-resident licensing by most states and protects consumers and the industry from rogue agents who cross state lines.
• Most states use some form of electronic licensing system to simplify and expedite the licensing process, employing the services of the National Insurance Producer Registry (NIPR).
• A majority of states now use the NAIC Uniform Applications for individuals and business entities, rather than varying state licensing applications.
• Nearly all states now use a National Producer Number for licensing purposes, rather than state-specific licensing or social security numbers.
• Nearly all states have implemented NIPR’s centralized, electronic address change request system, eliminating the need for paper notifications of address changes to separate insurance departments.
• Most states now process producer appointments electronically using NIPR.
• High compliance (35 or more states) exists with respect to 26 of the 37 NAIC Uniform Resident Licensing Standards.

The assessment also identified the following areas for improvement, among others, which the report recommends the NAIC address moving forward:

• Low compliance (less than 35 states) exists with respect to 12 of the 37 NAIC Uniform Resident Licensing Standards, including the standards for accepted lines of authority, use of electronic fingerprinting for new resident licensee background checks, use of the NAIC uniform application, and continuing education exemptions.
• The need to streamline business entity licensing and Secretary of State registration requirements for non-resident business entities.
• The need for greater coordination between national producer groups and their state affiliates in seeking implementation of agent licensing reform initiatives, suggesting that professional standards for producers be developed and supported.

Improving the agent licensing system is an important goal for NAIFA and NAIFA has supported the NAIC’s producer licensing uniformity and modernization initiatives. A more efficient licensing system would reduce cost and time-consuming bureaucracy for NAIFA members, especially those licensed in multiple states, so they can better spend their time serving their clients.

• Read the NAIC Producer Licensing Assessment at www.naifa.org/advocacy/documents/plareport_02192008.pdf

NAIFA Staff Contact: Bill Anderson, Senior Vice President, Law & Government Relations, wanderson@naifa.org, 703-770-8193; and Michael Gerber, mgerber@naifa.org, Vice President & General Counsel, 703-770-8190.