Round and round she goes, but where NFIP ends up, nobody knows p4

We are picking up where our Feb. 4 post left off and getting into the particulars of the National Association of Registered Agents and Brokers Reform Act. The U.S. Senate has tied the NARAB bill to the Homeowner Flood Insurance Availability Act, the bill that would postpone many flood insurance rate increases resulting from implementation of yet another law, the Biggert-Waters Flood Insurance Reform Act.

The NARAB bill does not deal with insurance; it deals with insurance agents and brokers. Its objective is to make it easier for agents to sell coverage outside of their home states. As the law stands now, an agent licensed in Florida may sell insurance in Florida. If she wants to sell in another state, she has to go through the licensure process there.

The solution proposed in the bill is that Congress create a nonprofit board, dominated by state insurance regulators, that would establish standards for and then oversee multi-state licensure. While the proposal seems straightforward enough, the White House has expressed some reservations.

The board would develop standards tougher than the most exacting state regulations. An agent licensed in her home state who met these standards would apply to the board for “membership.” The board’s approval would mean that the agent would meet all regulatory requirements of the state the agent wanted to do business in.

Board approval would essentially be a “Get Out of Jail Free” card. Rather than going through the multiple steps required by each state’s insurance department, agents would present the board’s stamp of approval and proceed directly to licensure. It’s important to remember that board approval would not take the place of a state license. Insurance regulation would still reside with the states.

The bill raised red flags at the White House on a couple of fronts, and we’ll discuss those in our next post.

Source: Insurance Journal, “Senate Links Agent Licensing Reform with Flood Insurance Delay,” Andrew G. Simpson, Jan. 21, 2014

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