Tag Archives: Joel Wood

The Painstaking Saga Behind NARAB

On Jan. 9, I had the pleasure of sharing spontaneous drinks and dinner with José Andrés, Washington’s first and only international celebrity chef.

He had just launched China Chilcano, the latest in his burgeoning empire of restaurants, only three days old at the time, and was only a month away from opening yet another concept. He asked how I was doing, and I told him I’d had a great week—that a bill I’d been working on for literally 23 years at the Council (NARAB, attached to the TRIA extension), was passed by the Senate just the day before.

About then, another well-wisher approached José and congratulated him on his latest achievement. “Meet my friend Joel,” he says to the guy. “He’s either the best lobbyist I’ve ever met—or he’s the [worst].”

Rightly or wrongly, I’ve been majorly associated with NARAB (“National Association of Registered Agents and Brokers”) in its multiple iterations since the early 1990s. It’s not the biggest thing I’ve worked on by any stretch—the Terrorism Risk Insurance Act, the Affordable Care Act and Dodd-Frank are all far more important to the nation, our member firms and your clients. But NARAB has been the most painstaking.

We’ve snatched defeat out of the jaws of victory on so many occasions that it almost seemed preordained we’d lose again when TRIA failed in December. Facing implacable opposition to NARAB from retiring Sen. Tom Coburn, R-Okla., then-Majority Leader Harry Reid, D-Nev., pulled the plug on TRIA and adjourned the Senate for the year—astonishing all of us who’d worked so hard on the legislation.

Much of the blame at the time went to Coburn, as he was the only announced senator down the stretch with a “hold” on the TRIA/NARAB legislation, but the truth is more complicated, as there was considerable liberal discontent with the legislation. That’s all water under the bridge now.

Within a couple days of the disaster, House Speaker John Boehner, R-Ohio, and incoming Senate Majority Leader Mitch McConnell, R-Ky., both released strong statements saying they would put TRIA passage on the “early” priority list for January. Both kept their word.

Congress convened Jan. 6. The House bill passed in December was re-enacted Jan. 7, and the identical bill cleared the Senate Jan. 8. President Obama signed the bill into law Jan. 12. This followed critical leadership on the issue from Chairman Jeb Hensarling, R-Texas, of the House Financial Services Committee, and Sen. Richard Shelby, R-Ala., the new chairman of the Senate Banking Committee.

Now the work can begin to actually create NARAB—an interstate licensure clearinghouse for nonresident producer licensure. Decades of compromises to get the legislation to the finish line will now become complications you’ll hear about in the coming months. The governance of the body will come principally from state insurance commissioners and the National Association of Insurance Commissioners. Funding problems will emerge because no federal dollars or borrowing will be allowed. And there will be disagreements about the standards for NARAB membership.

The basic deal is this: Any producer first has to be properly licensed in his or her own state. Then on a purely optional basis, he or she can apply for membership in NARAB and meet whatever requirements are established. The applicant can then check off the states in which he or she needs a nonresident licensure, paying the applicable state fees. That all sounds really simple, but we’re sure in practice it will be akin to giving birth to a live squirrel.

The protracted lobbying effort initiated in 1992 by the Council’s forerunner organizations (the National Association of Casualty and Surety Agents and the National Association of Insurance Brokers) seems disproportionate. At its core, NARAB is simply an administrative mechanism to facilitate nonresident producer licensure. But since its inception NARAB has been caught up in the push and pull of the broader debates over federal-vs.-state insurance regulation. Many colleagues of mine are putting their children through college in this continuing war of attrition.

My own children, meanwhile, are nonplussed by the history of NARAB, but here it is anyway. First it was a purely federal option, as a part of now-retired Rep. John Dingell’s, D-Mich., insurer solvency legislation, which would have created an Optional Federal Charter for insurers. That went nowhere. Then we spun it off as a stand-alone and waged a lonely battle for years, culminating in the “NARAB 1” title of the Gramm-Leach-Bliley Act of 1999. To sneak it through Congress over the opposition of then-Sen. Phil Gramm (for months, my colleagues referred to me as “Dead Man Walking” on the assumption that Gramm would prevail), we had to dumb down the provision. If a majority of states passed reciprocal licensing laws, there would be no NARAB. So a majority of states did so, which was welcome. But it wasn’t enough.

In the past decade, the coalition of NARAB supporters has grown substantially, with other producer organizations and the NAIC itself moving from a position of opposition to strong support over the years. In that decade, NARAB passed the House on at least six occasions (I lose count), both as a stand-alone measure and as part of other reforms.

As we now move to implementation issues, I will pause to give thanks for the many in Congress who made this happen. Most recently, our champions and authors were Rep. Randy Neugebauer, R-Texas, Rep. David Scott, D-Ga., Sen. Jon Tester, D-Mont., and now-retired Sen. Mike Johanns, R-Neb. We can’t thank them enough. And I think back to the 1999 Gramm-Leach-Bliley debate, when Rep. Sue Kelly, R-N.Y., and the late Sen. Rod Grams, R-Minn., fought so hard for NARAB.

I guess it’s easier to be gracious in victory, but we wish all the best for Sen. Coburn, who did everything he could to beat NARAB. I regarded him as an obstinate SOB for many months, but he always acted out of his own federalism principles. He retired from the Senate when his cancer recurred, and we have high hopes he can beat it. Because he’s just that obstinate.

This article first appeared in Leader’s Edge magazine.

Of Laws, Dirtbags and Insurance Rebates

My paternal grandmother died more than 20 years ago, having been dirt poor in rural Mississippi her entire life. Her husband and two children preceded her in death, so it fell to us five grandchildren to settle her tiny estate. We donated her ramshackle house to the local fire department so they could burn it down for practice. Because I was in the insurance industry (albeit in a far-removed lobbyist job), I took on the task of sorting through her financial papers. She had meticulously catalogued everything.

It turns out my grandmother was obsessed with not being a financial burden to anyone. She had bought funeral insurance years earlier from the local mortuary, though the policy only covered $1,000 of the actual $6,000 cost. She had been making payments on several health policies—all sold by the same agent—that were duplicative at best. One looked to be a legitimate, if expensive, Medicare supplement. One was cancer insurance from a no-name Alabama insurer. Another was a “catastrophic gap-filler” designed to wrap around the Catastrophic Care Act—even though Congress repealed that law years earlier.

The names of the insurers seemed to change every year on the multiple policies, and she had filed away three “warning” letters from carriers suggesting that her agent may have been churning policies to collect more commissions.

In her later years, my grandmother’s only income was a meager monthly Social Security check, and most of it obviously went to pay a dirtbag insurance salesman who never returned my calls. At a meeting of the National Association of Insurance Commissioners a few months after we buried her, I broached the subject with then-Mississippi Insurance Commissioner George Dale.

“You wouldn’t believe the number of these guys who are out there going door to door,” he said. “It’s almost impossible to keep track of them.”

I ultimately let the matter go, but that decision still gnaws at me. My grandmother’s insurance episode also informs my views on regulation. So much of my professional life has been spent trying to minimize regulation, which in this industry is invasive, all-too-often protectionist and more bureaucratic than it should be. My conscience is clear in the cause of advocating on behalf of large commercial insurance brokerage firms. It is the abuses of just a few that have resulted in a million iterations of “unfair trade practices” regulations.

Near the top of the list of laws historically aimed at curbing insurance sales abuses are anti-rebating statutes. Personally, I love rebates. When I buy a car, I like the rebate from the manufacturer. But rebates in the insurance industry conjure visions of side deals, kickbacks or back-end payoffs. They are illegal inducements to purchase an insurance policy and are specifically prohibited by most state statutes (thank you, Florida and California, for getting rid of them).

Life insurance sales in the late 19th and early 20th century begat these laws, as overuse of rebates led to high-pressure sales tactics, deceptive policies and excessive commissions. The practice spread to property-casualty, leading regulators and states to enact anti-rebating statutes.

Fast forward to the 21st century. In the commercial insurance world, the anti-rebating laws are used mostly so small agents can turn state’s evidence against their larger, better competitors, which are offering better products or services. Do a Google search of anti-rebating statutes. The protectionist proponents of these laws always put quotation marks around the words “valued-added services,” as though there isn’t really such a thing.

The result: Commercial insurance brokerages (depending on the state interpretation) may not provide legal services, payroll services, referrals that involve discounts, HR compliance advice, employee benefit statements listing benefits provided to employees not relating to insurance purchased and a million other services. If the services aren’t delineated in the underlying policy form, they’re illegal. I hear from Council member firms every week suffering under the enforcement of these laws, which are absurd in the commercial context. Throughout the nation, there should be delineation between business insurance and personal lines/life insurance with respect to anti-rebating laws.

This is an uphill climb. These statutes are too often supported by local and state agent organizations representing smaller independent insurance agencies. They’re the ones who use “kickbacks” as an epithet and seek regulation even though they otherwise profess to be small-government conservatives.

Ideally, anti-rebating statutes shouldn’t exist at all. But victims like my grandmother remind us why consumers need protection in the complicated world of insurance.

We know who the dirtbags are. Laws and enforcement should be focused on them. Agents and brokers, meanwhile, provide legitimate services to businesses that require and demand value. For decades too long, agents and brokers in the commercial space have been collateral damage in America’s zeal to enforce anti-rebating laws. This must stop.

This article first appeared in Leader’s Edge magazine.