The 2025 Agenda

As we near the end of 2024, much of The Council’s and the industry’s focus is on ensuring that we are well positioned to accomplish as much as possible in 2025.

One area of continuing frustration for Council members that we hope to address next year is the confusion and inefficiency that remain prevalent in states’ insurance producer licensing.

Multiple measures in the last 30 years helped drive states toward licensing uniformity. Creation of the National Insurance Producer Registry in 1996, passage of the Gramm-Leach-Bliley Act in 1999, and states’ adoption (in whole or in part) of the National Association of Insurance Commissioners’ (NAIC) Producer Licensing Model Act (PLMA) in the early 2000s all pushed states to adopt more consistent licensing laws, processes, and applications, especially with respect to non-resident licensing requirements.

As you are all well aware, uniformity in producer licensing brings real benefits to insurance consumers, regulators, and industry. Lack of uniformity, however, generates significant complexity and costs. When the cost of doing business increases, our clients ultimately pay.

Despite advancements over recent decades, the state licensure system is still not the well-functioning, efficient system for which regulators and industry alike have been striving. In fact, in many cases we are going in the wrong direction as individual states continue to add bespoke obligations to their licensure processes.

We have written previously about the inanity of the appointments requirements and processes and we will continue to advocate for the complete elimination of any such requirements for individual producers.

We also intend to focus on four other areas of licensure reform, which are discussed in detail below:

• Rebooting (again) efforts to get the National Association of Registered Agents and Brokers (NARAB) up and running; X Eliminating state “business entity affiliation” requirements for producers;
• Clarifying that surplus lines producer licensure should only be required for individuals who are directly engaged in procuring coverage from non-admitted insurers; and
• Eliminating the surfeit of extraneous general state licensure requirements and procedures.

1. NARAB Reboot

Congress in 2015 enacted legislation authorizing the establishment of NARAB. If it ever gets up and running, NARAB would create a national licensure body and anyone (and any firm) that satisfies the pertinent requirements could become a member of NARAB. Members would have the right—under federal law—to be eligible to receive a non-resident license in any state for any line of authority for which they hold a home state license simply by paying applicable licensing fees in the states in which they are not a resident.

First, though, the president must nominate 13 individuals to serve on the NARAB governing board (eight state insurance commissioners and five industry representatives) and those individuals must be confirmed by the Senate.

The unexpectedly cumbersome nomination process has led many of the insurance commissioners who had been asked to serve to voluntarily withdraw from consideration. President Barack Obama formally nominated a sufficient number of members to constitute a quorum, which would have allowed NARAB to actually launch. Unfortunately, the Senate failed to confirm any of those nominees. We have made even less headway during the past two administrations despite promises from both to advance board nominees.

So, we will start again. Because this likely will not be at the top of the new administration’s priority list, we also will explore amending the NARAB statute to eliminate the political confirmation requirement in an effort to expedite the organization’s launch.

2. Business Entity Affiliations

A business entity affiliation—although not uniformly defined—is a mechanism to show that a producer is authorized to conduct insurance business for a particular licensed business entity. Affiliations (and terminations of affiliations) must be initiated and tracked by the business entity. About 20 states require affiliations for at least some producers, for example, designated responsible licensed producers (DRLPs), producers with ownership or leadership interest in the entity, or all individual licensed producers representing or doing work for the entity.

The process for affiliating producers is inefficient and burdensome and there is no consistent method, paper or electronic, for managing affiliations. For example, some states:

• require state-specific paper forms;
• stipulate that affiliations must be processed electronically using a state-specific form;
• require a request for affiliation by letter; and/or
•  require a fee for the affiliation filings.

Affiliations thus are onerous and costly to track. Because they essentially are tantamount to employment status verifications and the firm analogue of insurer appointments, they do not appear to serve any clear public policy aim.

We therefore will ask the NAIC to clarify that business entity affiliations are not required and then we will advocate directly with the states that still maintain such requirements to eliminate them.

3. Surplus Lines Producer Licensure

A new problem for us, but not for many of you: The states are all over the map regarding who needs a surplus lines license, especially when a retail producer works through a wholesaler to place a non-admitted policy.

We think the NAIC’s Non-Admitted Insurance Model Act actually gets this right. Section 5(I) of that model dictates that no person shall “procure a contract of surplus lines insurance” unless they hold a surplus lines producer license.

Unfortunately, only 15 or so states use the “procure” licensure trigger, i.e., focus on the producer’s interaction with the non-admitted carrier. Many other states deploy an incredibly broad licensure requirement based on sell/solicit/negotiate activities that trigger retail producer licensing, which could theoretically require anyone who touches a surplus lines transaction to be licensed.

We are working to address over-licensure concerns in the non-admitted space by advocating for enactment of the NAIC model surplus lines licensure requirements nationwide.

4. Producer Licensing Application and Requirements

Finally, we’re seeing states slip away from the intention of the NAIC’s Uniform Application for licensing and the Producer Licensing Model Act. For example, there are increasing bespoke questions and requirements related to:

• Supplemental forms in addition to the Uniform Application;
• Requiring non-residents to file fingerprints even when the home state already requires them;
• Requiring non-residents to take an exam in order to be granted a nonresident license;
• Continuing education and product training requirements (e.g., ethics, flood, annuities, long-term care); and
• Non-uniform application questions around citizenship, criminal history, tax records, and other areas.

We intend to work with the NAIC, in partnership with the National Insurance Producer Registry staff, to encourage states to adhere to the Uniform Application. With respect to examinations, continuing education, and training requirements, we also will advocate that states follow the PMLA’s existing reciprocity framework. Buckle up. There’s a lot of work ahead, but the best—we hope—is yet to come.