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Your Guide to the OFC, NARAB II and the Interstate Compact

These regulatory initiatives may affect how you do business day to day.

By Jennifer Piantedosi, legislative assistant, NAIFA Law and Government Relations

While the topic of modernizing insurance regulation may sound a bit dull, the results may be anything but for your business. There are three major initiatives currently in play that are aimed at streamlining the regulatory environment, and may see some action at both the state and federal levels in the coming legislative sessions.

Optional federal charter
While the concept of an optional federal charter has been floating around for some time, the National Insurance Act of 2007 puts the issue front-and-center. It?s a controversial issue, including among our membership. Advisor Today had two prominent NAIFA members weigh in on the pros and cons of the OFC in ?Point Counterpoint.?

Under the OFC, the federal government would give life insurance and property and casualty agents and insurers the choice of being overseen by one federal regulator, rather than by multiple state regulators. An agent could choose to be regulated by the federal authority or remain within the state system. The bill would create the Office of National Insurance, housed within the Department of Treasury, which would establish licensing and continuing-education (CE) standards for all nationally regulated agents and insurers, but it couldn?t hold state-regulated agents and insurers to these standards.

The OFC is the only comprehensive proposal to address all areas of insurance regulation that need reform and modernization. The National Insurance Act has been introduced in both the House of Representatives and the Senate, and both chambers continue to hold hearings on it.

Interstate Compact
The Interstate Insurance Product Regulation Compact, more commonly known as the Interstate Compact, is a model law that the National Association of Insurance Commissioners adopted in 2003. Its goal is to improve the speed to market of life insurance, annuity, disability income insurance and long-term care products. (No other products are covered.) This means that companies can file products with a newly established commission, and once approved, agents can sell those products in every state that has adopted the compact. Currently, 30 states have signed on to the compact, and several others are considering it.

NARAB II is an updated version of a federal proposal from 1999 to establish a national board to oversee agent licensing and CE standards. Under the proposal, any agent or agency can choose to be a member of the National Association of Registered Agents and Brokers and then be held to a single set of licensing and CE standards in every state in which they do business.

NARAB II would not establish a federal regulator; it would create a board consisting of insurance commissioners, carriers and producers, who would set uniform licensing standards. The NARAB II proposal was introduced in the House of Representatives in March and is currently being debated.

Detailed information on these three major proposals is available on NAIFA website?s under the section Insurance Regulatory Reform and Modernization at Below is a brief overview of the proposals? salient points.

  Interstate Compact NARAB II OFC
Streamlines multistate agent licensing and CE standards   X X
Streamlines multistate product approval X   X
Comprehensive reform     X
Establishes federal regulator     X
NAIFA position supports supports neutral


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