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Round and round she goes, but where NFIP ends up, nobody knows p3

Tue Feb 4th, 2014 on     Insurance Law,    

We are back to discussing the bill passed by the U.S. Senate that will delay flood insurance rate hikes. The Senate combined the National Flood Insurance Program bill to another insurance bill, the National Association of Registered Agents and Brokers Reform Act. We talked about the flood insurance bill in our Jan. 31, 2014, post. Here, we will tackle the NARAB bill.

Insurance agents and brokers don’t come up often in this blog. We tend to focus on insurance carriers and consumers’ issues with coverage. But we also exhort consumers to read their policies carefully, and that is where agents and brokers come in. When you are buying homeowners insurance, for example, you need to understand the particulars; your agent or broker should be explaining those to you.

States regulate insurance agents just as closely as they regulate insurance companies. For example, you have to have a license to sell insurance. According to the Florida Office of Insurance Regulation, there are 10 different types of licenses to choose from in the property/casualty category, each with a long list of prerequisites candidates must fulfill just to qualify to take the exam. Homeowners and auto insurance fall in this category. Life and health insurance and other types of coverage have their own license requirements.

Getting your license is just part of the process. Agents must be “appointed” by insurance companies to sell their products. The insurer makes the appointment to the state, which means a new agent may have a job with an insurance company or agency but may not be able to sell insurance. Appointments have to be renewed.

There’s more to it (and it all costs money), but we hope this makes it clear that becoming an agent — and staying one — takes time and commitment. And unless a state has a reciprocity agreement with another state, if the agent wants to sell insurance across the state line, there’s yet another licensing and appointment process to go through. Florida, for example, allows life/health agents from other states to skip the education requirement — but not the exam — for licensure here.

The NARAB bill would make the licensing process a little easier for non-resident agents and brokers. We’ll discuss how it would work and why the White House is less than enthusiastic about it next week.

Sources: 

Insurance Journal, “Senate Passes Flood Insurance Delay, Agent Licensing Bill,” Andrew G. Simpson, Jan. 30, 2014

Florida Office of Insurance Regulation, “Consumer Resources,” accessed Feb. 4, 2014

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