Good morning. My name is Clare Farragher. It is my privilege to represent over 200,000 constituents in the New Jersey General Assembly, where I serve as Deputy Speaker and also as a member of its Banking and Insurance Committee.
I appear before you today in my capacity as President of the National Conference of Insurance Legislators (NCOIL), an organization I have been active in since 1992.
NCOIL is a non-partisan organization whose primary area of public policy concern is insurance legislation and regulation. NCOIL state legislators chair or serve as members of the committees responsible for insurance in their respective legislative houses across the country.
On behalf of NCOIL legislators, let me express my appreciation for this opportunity to testify on the issue of multi-state licensing and the implementation of the so-called NARAB provisions of the recently enacted Gramm-Leach-Bliley Act.
I would like to point out that, with the exception of the redomestication and NARAB provisions, NCOIL has supported the financial modernization legislation in letters to Congress in 1997, 1998, and 1999.
Now that the legislation has been enacted, NCOIL state legislators are focusing their specific attention on the provisions of GLB that could lead to the establishment of NARAB. GLB would begin implementing NARAB after three years - if a majority of states have not enacted uniform laws and regulations governing the licensing of producers - or, if states have not enacted reciprocity laws governing the licensure of non-resident producers.
NARAB would serve as a national licensing authority that would draw on existing state laws to devise uniform licensing requirements and would serve as the mechanism for agents and brokers to obtain licenses in any state where they want to do business. It would, to say the least, create yet another regulatory bureaucracy, one that would significantly undermine the ability of states to regulate the business of insurance.
In its wisdom, however, Congress has given states the time to enact the kind of uniform laws and rules that will make NARAB unnecessary.
I am here to tell you that the states can and will do that.
I am here to tell you that the states will do it within the three-year deadline set by Congress in the GLBA.
And, as President of NCOIL, I am here to report to you, that even though GLB was enacted only five months ago, states have already begun a strong effort to meet the deadline and avoid the creation of NARAB. I expect many more will follow suit as their state legislative calendars permit.
Kentucky has led the way in addressing the producer licensing issue. Its House and Senate have already passed complying legislation that is now awaiting the Governor's signature. The Kentucky legislation would provide, among other things, for a single insurance producer license for residents and non-residents of the state. It would also bar the Insurance Commissioner from assessing a greater fee for an insurance license to a non-resident based solely on the fact of non-residency. It would also allow an individual licensed surplus lines broker in another state to obtain a non-resident surplus lines broker's license in Kentucky if reciprocal arrangements existed with the other state.
The Alabama House Committee on Banking and Insurance has favorably reported House Bill 317, which would allow for the reciprocal licensing of non-resident agents and brokers licensed in other states. This legislation is presently on the calendar and awaiting action by the full House.
New York State Senator Neil Breslin, who chairs the NCOIL State-Federal Relations Committee, recently introduced New York Senate Bill 7243. This bill would create a more uniform and efficient system of producer licensing through a reciprocal licensing process.
And in New Jersey, I am presently working with the Department of Insurance to write legislation that would conform the NAIC model act to the existing laws in New Jersey. I anticipate introducing this bill in the near future.
All of the above proposals have a solid, well thought-out foundation. They have their essential basis in a model law developed by the National Association of Insurance Commissioners (NAIC).
The NAIC adopted the model earlier this year, following two years of testimony from all segments of the insurance industry, consumer groups, and other interested parties.
The NAIC model responds to the reality that more efficient and uniform insurance producer licensing is needed to maintain a U.S. competitive edge in the increasingly global economy. At the same time, the model preserves the strongest features of state regulation of insurance as authorized under McCarran-Ferguson - state authority and state accountability.
As Commissioner Vaughan explained a few minutes ago, the NAIC model act would, among other things, encourage uniformity in areas such as non-resident licensing, exemptions, commissions, appointments, and reciprocity.
Despite the GLBA deadline, I am confident that legislators understand the ramifications of NARAB and will act expediently. NCOIL has worked to provide state legislators with appropriate information regarding GLB and NARAB. And NCOIL will continue to educate state legislators on this issue.
In response to my request earlier this year, many trade associations submitted comments to the NCOIL State-Federal Relations Committee regarding their stance on the NAIC producer licensing model act. Industry comments, while acknowledging imperfections in the NAIC Producer Licensing Model, demonstrated overall support. The trade associations that submitted comments included: The American Insurance Association, the American Council of Life Insurers, the National Association of Insurance and Financial Advisors, the Council of Insurance Agents and Brokers, the National Association of Life Companies, the National Association of Mutual Insurance Companies, the Independent Insurance Agents of America, and the National Association of Independent Insurers.
State legislators from across the country will vote on a resolution in support of the NAIC model when they meet at the NCOIL Summer Meeting in Burlington, Vermont, between July 6 and 9. The vote will follow several presentations and open public discussions on the model in the NCOIL State-Federal Relations Committee. It will culminate nearly two years of discussion and debate at NCOIL meetings.
I anticipate that the NCOIL State-Federal Relations Committee and then the NCOIL Executive Committee will pass that resolution by unanimous or near-unanimous vote and adopt the NAIC Producer Licensing Model Act.
Upon adoption of the resolution, state legislators will coordinate their efforts with insurance commissioners to expedite passage of the NAIC model. NCOIL legislators will sponsor producer licensing legislation in their respective states, work with their legislative leadership throughout the process, and continue to coordinate their efforts with the insurance commissioners.
Five months ago today, the President signed Gramm-Leach-Bliley into law. Since then, an incredible amount of groundwork has been completed to ensure the timely and successful implementation of GLB. As I stated earlier, state legislators are discontent with the NARAB provision. In the next two and a half years, they will continue to push for legislation in their states that would provide for more efficient agent and producer licensing. Today, they are well on their way in this endeavor.
Thank you. I would be happy to answer any questions.
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