Two-Decade Effort to Create National Insurance License Overcomes Last Hurdle

By K. Claire Compton

Jan. 16 — When TRIA failed to clear Congress on Dec. 16, it was because of then-Sen. Tom Coburn’s (R-Okla.) objection to one of the less controversial riders, a national body that would allow insurance sellers to obtain a single, multistate license.

The turmoil that followed centered upon Terrorism Risk Insurance Act (Pub. L. No. 114-1) the terrorism insurance backstop, which expired two weeks later on Dec. 31. But to a group of insurance lobbyists, the failure of the rider that would have established the National Association of Registered Agents and Brokers’s (NARAB) was the latest disappointment in two decades of what felt like a Sisyphean task.

“We’ve snatched defeat out of the jaws of victory on so many occasions that it almost seemed preordained that we’d lose again when TRIA failed last December,” said Joel Wood, who has been the senior vice president of government affairs at the Council of Insurance Agents and Brokers for 23 years. Wood has been involved in trying to create NARAB and its early iterations for that entire time, which he said led one friend to introduce him as “either the best lobbyist I’ve ever met—or the [worst].”

Those efforts finally succeeded Jan. 12, when President Barack Obama signed into law a TRIA reauthorization bill that included a title establishing NARAB. The association will act as a clearinghouse to provide interstate licensing for nonresident producers, allowing brokers and agents to do business across the country instead of within the confines of individual states or jurisdictions.

Wood says NARAB, at its core, is a “red-tape reducer.”

“I’ve heard from so many member firms, even the smaller ones have at least one person on staff whose only job is to maintain the licenses,” Wood said. “I’ve seen the thousands of sheets of paper that are required, the stamping this, the requiring that, and this state saying you have to attach things by paperclip instead of staple—It’s technologically backward.”

Kevin McKechnie, the executive vice president of the American Bankers Insurance Association, said he has spent “most of my professional life” working on NARAB. McKechnie said one way to understand the roadblocks NARAB encountered is to look at them in the context of state versus federal authority, a balance that has been especially significant for the U.S. system of insurance regulation.

State Sovereignty

“The system of state insurance regulation has had its critics since it was first inaugurated two centuries ago,” he said in an interview with Bloomberg BNA.

Coburn’s objection was in defense of the state system, because the measure doesn’t give states the ability to opt out of the association. The NARAB II title was written instead to compel state participation, McKechnie said.

“What [Coburn] really wanted was something less than ‘compel,' he would have rather had an incentive,” McKechnie said. “He wanted it to be there as a matter of principle. To his way of thinking, and to most people’s, the Constitution leaves sovereignty to the states, and he didn’t want to undermine that.”

While NARAB in its infancy was attached to a more controversial effort to wrest insurance regulation from states and give it to federal authorities, Wood said, the final version of NARAB and its governance structure strengthens rather than undermines state supervision.

Lucky No. Seven

The version of NARAB that finally became law this month had passed six previous votes, in both the Senate and the House, as standalone bills and as riders. Rep. David Scott (D-Ga.) sponsored two standalone NARAB bills that passed the House on voice votes; one in the 110th Congress and the other in the 111th.

Rep. Randy Neugebauer (R-Texas) took up the mantle with a measure in the 113th Congress that got a 397-6 vote. The Senate passed on each of them.

NARAB did pass the Senate twice, the first as a rider on a flood insurance bill (S. 1926) in January 2014, and the second attached to the Senate’s first version of the TRIA reauthorization in July 2014.

The House version of the flood bill that was eventually agreed to didn’t include the NARAB title, however. The Senate’s first TRIA bill passed in the House, giving the NARAB measure its sixth floor vote, but additional House amendments sent it back again to the Senate, where it finally failed on Coburn’s objection.

Try, Try Again

The bills supporters put the trial-and-error method to good use. Following the failure to win passage of TRIA in December, they began working immediately on a strategy for not only reauthorizing the terrorism insurance program, but trying to make NARAB part of that important legislation.

Members of the Coalition to Insure Against Terrorism told Bloomberg BNA that they talked first to their “lead champions,” Sen. John Tester (D-Mont.) and Neugebauer, and worked from there.

“Literally the next day we reached out to both the House and the Senate and received word that it would be one of the first things they did in the next Congress and that NARAB was going to remain attached unless there were certain obvious roadblocks that forced it to be separated,” said John Prible, vice president for federal government affairs at the Independent Insurance Agents and Brokers of America. The coalition turned to identifying potential problems for NARAB.

Coburn, after all, was no longer a threat because he retired at the end of the 113th Congress. But the new Congress introduced unknowns into the equation.

“We met with every new Senate office, every new House staff person, before they were even sworn in, and explained the issue to them and received assurances that everything was OK,” Prible said in an interview with Bloomberg BNA.

Coalition members held a three-hour conference call on New Year’s Eve to share what they had learned and to try to anticipate any other hiccups. If there had been a problem, Prible said, the coalition wouldn’t have pushed NARAB at the expense of TRIA, which was the bigger priority and the reason for the coalition's existence. However, each participant reported good news from meetings with lawmakers and their staff.

Nevertheless, Congress had upended their expectations before.

“To be honest, the first day or so we were holding our breath, but as things moved along it became apparent that TRIA was going to happen, and so would NARAB,” Prible said.

Two Decades in the Making

NARAB first appeared in 1993 as part of then-Rep. John Dingell’s (D-Mich.) proposal to create an Optional Federal Charter (OFC) for insurers. Under an OFC, insurers could write policies for customers in any and all of the states.

By accepting the charter, however, the insurer would be subject to direct federal regulation and bypass state systems. Dingell’s bill never even got a committee vote, but the OFC continued to be the subject of policy debates since then.

In 1999, NARAB made it into the Gramm-Hatch-Bliley Act, but with a proviso. Under the law, NARAB would be created only if a majority of states failed to sign reciprocal agreements within the following three years, a clause the industry had to impose in order to overcome the opposition by then-Sen. Phil Gramm’s (R-Texas), Wood said.

“A majority of the states did so, which was welcome, but it wasn’t enough,” Wood said.

State Commissioners Warm to NARAB 

Over the next decade, the number of NARAB supporters grew, but the effort truly took off when it first gained the crucial support of the National Association of Insurance Commissioners (NAIC) in 2008. The organization, made up of each state’s top insurance regulator, had been opposed to what it saw as an encroachment on the state-based system.

“People on the state side had believed this was the camel’s nose under the tent for federal regulation,” Wood said. When the NAIC finally endorsed the legislation it was a “critical point, because they had started from a position of hostility, standing opposed to our efforts in the ‘90s.”

Prible said he first started working on the latest version of NARAB in 2007, the concept that would become know as NARAB II, by running it past potential sponsors and leadership. The industry supporters worked on fine-tuning the proposal so that it could maintain its purpose but be acceptable to all of the industry groups as well as the NAIC.

“It was a really fine needle to thread,” Prible said.

The NAIC finally endorsed the legislation in 2008. But two years later, state elections caused a massive turnover in state insurance commissioners, most of whom were political appointees, and within three years two-thirds of the NAIC were new members. Then the lobbyists had to repeat the process to win the endorsement again.

“We wanted to reevaluate their support of it, so we had to go through a lengthy education with each of the commissioners about what the bill did, do a few tweaks, and the result was that they came back and re-endorsed it in 2011,” Prible said.

OFC Fades Away

On the opposite side, support for an OFC and greater federal oversight has waned since the 2008 financial crisis, according to Wood. NARAB’s success can also be attributed to the drop-off in what used to be a vocal contingent that argued NARAB was an incremental change that came at the expense of the broader OFC.

“There had really been this battle over the optional federal charter, and that has not resurfaced post-financial meltdown,” Wood said. “If OFC had still been a vibrant debate I’m not so sure we could have independently done [NARAB].”

Filling the NARAB Board 

The NAIC’s support is understandable, given the role it will play in NARAB. Obama has 90 days after signing the bill to appoint 13 members to the NARAB board—eight of whom must be picked from NAIC membership. The NAIC may present a list of its own recommendations, which the president may consider, but isn't obligated to follow.

The remaining five seats are earmarked for representatives of different insurance sectors. Three seats must be held by someone with a background in property and casualty insurance and two are reserved for those with a life insurance background.

“There’s considerable room for the president to consider candidates of varying degrees of expertise on this,” Wood said. “We want to make sure the broker community is well represented on this, we’re working with other stakeholder groups to identify candidates.”

Prible said there is no guarantee that the White House will listen to recommendations, but the coalition is hopeful candidates will represent a broad swath of experience. An agent that has experience selling in multiple states, for instance, as well as representatives from the brokerage and life insurance industries.

“So between the three of them they could help the remaining members on the board with their own kind of personal background on how the system currently works and how it can be improved,” he said.

Next Step

Lobbyists said the operational details of NARAB will be up to the board to decide. Once the board members are appointed, they will have to decide which facet of their mandate to implement first.

McKechnie said he expects a clear idea of what the board will look like and who will lead it by the November NAIC meeting. McKechnie said his prediction for their first task is creating the actual license for brokers, since that will be more straightforward than tackling originating standards. Regardless, he said he expects a years-long implementation curve.

Wood said he’s hopeful that the licensing piece won’t take longer than one year. It remains to be seen how that will be set up. One possible scenario Wood offered would require that a producer first be licensed in his or her home state. On an optional basis, that producer could then apply for membership in NARAB, and meet its requirements. Finally, the applicant would check off which states they would like a nonresident licensure and pay the applicable state fees.

But Wood said he expects there will be a great deal of debate over each step, including seemingly simple ones like the criteria for NARAB membership.

“Getting this rolled out may be akin to giving birth to a live squirrel,” he said. “It’s going to take a little while, it’s not going to be free, I don’t expect any radical changes and I don’t expect it to change market conditions. But I hope that it will save hundreds of millions of dollars for our member firms.”

As for Wood, after 23 years working on NARAB, he accepts that there is nevertheless a good reason behind why the U.S. federal government was set up to make it easier to defeat a policy than it is to create one.

“A lot of bad stuff can be prevented from happening through the same means of utilizing all the tools of congressional dysfunction,” he said. “I just hope that someday, there’s some floor in some drab office building in suburban Kansas City with a sign that says ‘NARAB,’ where, when I croak, they can hang a picture of me in a dusty closet.”

To contact the reporter on this story: K. Claire Compton in Washington at

To contact the editor responsible for this story: Heather Rothman at