How will NARAB affect insurance broker competition?

Industry leaders widely heralded the passage of NARAB II, but some believe the effects on competition could be mixed for independents.

Insurance News

By

Supporters of legislation establishing the National Association of Registered Agents and Brokers fought for many years—25, by some counts—to bring last month’s bill offering a streamlined solution to producer licensing to fruition. And while most industry leaders expressed pleasure at its passage, some stress that there are still a number of unanswered questions relating to NARAB’s effect on the industry and on producers in general.

Tim Owen, vice president of product management at Vertafore, works with 23 state insurance departments to build regulatory systems focused on producer licensing, among other areas. From that vantage point, he sees some hurdles the NAIC and others will have to face in their work to implement NARAB.

“There are a lot of operational and technological things we’ll have to figure out,” Owen told Insurance Business America. “There could be regulatory implications, such as certain kinds of education that not all states require, that might make it a challenge for NARAB to streamline the licensing process.”

There are additional discrepancies, such as California’s background requirements, Georgia’s stipulation that an agent have an affidavit of citizenship and New York’s decision not to adopt the Producer License Model Act, that NARAB board members must clear up.

For independent agents, however, the most pressing questions revolve around how the simpler national producer licensing process will affection competition among agencies.

“Some small group of individuals probably picked for their personal acquaintances, rather than their insurance knowledge or abilities, could make some very difficult conditions in different states,” said Steamboat Springs, Colo. agency employee Ron Ravenscraft.

Owen agrees that the more uniform and reciprocal licensing process for non-residents afforded by NARAB will mean more competitors in more states—particularly in New York, California, Florida and Texas.

“Even regional and medium-sized agencies near borders will likely increase their non-resident licensed agents,” said Owen. “The smaller, local agency will consequently see increased competition from these non-residents, with their different pricing and business models.

“These main street agencies need to leverage technology and revise their business processes to drive efficiency and improved customer service levels to compete, and they should consider non-resident state expansion themselves.”
                                                               
 
 

Keep up with the latest news and events

Join our mailing list, it’s free!