State Of Ohio DEPARTMENT OF INSURANCE 2100 Stella Court, Columbus, Ohio 43215 (614) 644-2658        www.ohioinsurance.gov	Bob Taft, Governor J. Lee Covington II, Director

Testimony of
Holly Saelens, Assistant Director, Policy and Legislation
The Ohio Department of Insurance
Before
The Ohio Senate Insurance, Commerce and Labor Committee
Tuesday, September 11, 2001
On
Senate Bill 129, Agent Licensing Model Act

Mr. Chairman and members of the Committee:

My name is Holly Saelens and I am an Assistant Director for Policy and Legislation for the Ohio Department of Insurance. On behalf of Director Lee Covington, I am pleased to be here today to testify in support of Senate Bill 129, the Agent Licensing Model Act sponsored by Senator Scott Nein.

This legislation is a high priority for the Department because of the need for Ohio to comply with the requirements of the federal Gramm-Leach-Bliley Financial Modernization Act of 1999 (GLBA). GLBA required at least 29 states adopt full reciprocity for non-residents insurance agents to avoid the creation of a quasi-federal organization entitled NARAB -- the National Association of Registered Brokers and Agents by November 2002. At last count, 37 states have currently passed legislation that should meet the requirement specified in GLBA. Unfortunately, congressional interest in this issue has not subsided.

During a hearing before the House Financial Services Committee last Spring, Rep. Sue Kelly of New York, a key sponsor of the original NARAB provision in GLBA, said that states' efforts to enact reciprocal and/or uniform agent licensing laws would fall short without full state participation and uniformity. Specifically, Rep. Kelly said that "Congress must not let the states stop at 29 -- it must push further. We must realize the goal of uniformity for 50 states." Ohio's own Congressman Mike Oxley, the chairman of the House Financial Services Committee recently stated that insurance regulation must be reformed or face possible federal intervention. Congressman Oxley specifically stated that " It is my hope that our state legislators and insurance commissioners can enact such reform. If not, Congress will return to this issue with our own solution."

I am here today to report that by passing Senate Bill 129 with reciprocity measures and establishing the foundation for uniformity in agent licensing, Ohio is well on its way to demonstrating that state insurance regulation can work. Ohio is very fortunate as a state that under the leadership of Chairman Nein, legislation laying the foundation for reciprocity was just recently enacted in 1998. Enactment of Senate Bill 129 ensures that Ohio will be reciprocal for non-resident agents, creates the foundation for uniformity in processing of agent licenses, and more importantly, tells the U.S. Congress that Ohio will meet the requirements of GLBA.

Last June, Senator Nein presented this legislation to the committee with the expectation that a substitute bill would be ready for review by this committee this fall. I am happy to report that the Department and a group of approximately 20 stakeholders met several times over the summer to review the bill and make recommendations for changes. Our last meeting with stakeholders was held Wednesday August 29, 2001 at which time a series of changes were forwarded to Senator Nein for possible inclusion in the bill. In anticipation of a substitute bill being available at a future committee meeting, I would like to take a few moments to highlight some of the major changes that will be represented in this substitute bill.

• Senate Bill 129 incorporates a model act adopted by the National Association of Insurance Commissioners. This model is what is being used by all other states when pursuing reciprocity and uniformity.
• The model act provides for full reciprocity with other states by:
  
  1. Requiring reciprocity for any line of insurance issued by another state
  2. Expressly exempts non-residents from pre-licensing education and exam if licensed in home state;
  3. Specifically address non-resident licensing procedures and application information required. The Department currently uses the NAIC Uniform Application and will continue to do so;
  4. Business entities as defined in the bill no longer have to submit articles of incorporation or proof of good standing with the Secretary of State.
  5. Recognizes and accepts non-residents' compliance with home state's CE requirements.
• The model act lays the foundation for uniformity with other states by standardizing definitions and lines of authority.
• Senate Bill 129 strikes a balance between model act language and preserving statutory language that is important to Ohio agents. For example:
  
  1. Exemptions from licensing for customer service representatives are maintained. These individuals are an important part of the insurance transaction but are not soliciting, selling, or negotiating the sale of insurance;
  2. Ohio's requirements for pre-licensing and continuing education will not change;
  3. Maintains current protective standards for licensing agents that include background checks. In addition, standards for licensing and revocation of licensing all which were extensively debated in Senate Bill 154 are maintained;
  4. The bill has a six-month delay in effective date to allow stakeholders and the Department the time to implement the new requirements.

Finally, I would like to give credit to the numerous stakeholders who participated and provided comments to the Department throughout our summer meetings. I have attached a list of those individuals for your review. In addition, I would like to give special recognition to Senator Nein and his staff for encouraging and supporting this process so that we may be able to present you with a substitute bill in the future.

This concludes my testimony and I would be happy to try to answer any questions.