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ACLI and NAIFA Asks NAIC to Consider Question on Sale, Solicitation and Negotiation of Life Insurance Products

At the National Association of Insurance Commissioners (NAIC) winter meetings, held December 4-7 in New Orleans, the American Council of Life Insurers (ACLI) and the...
December 7, 2004

At the National Association of Insurance Commissioners (NAIC) winter meetings, held December 4-7 in New Orleans, the American Council of Life Insurers (ACLI) and the National Association of Insurance and Financial Advisors (NAIFA) asked the NAIC's Producer Licensing Working Group to address the following question:

"With regard to products sold by life insurers, does the qualification in PLMA Section 3 that a person shall not sell, solicit or negotiate insurance in this state without a license mean that the producer must be licensed in the state(s) where the: (a) sale, solicitation or negotiation occurs; (b) the policyholder principally resides; or (c) the policy is delivered?"

The Producer Licensing Model Act (PLMA) requires a producer to have a license where the selling, soliciting, or negotiating results in the sales transaction, but life insurers would like to avoid having to be licensed in several states for obvious reasons. Consider the example of a producer licensed in Maryland who wants to sell a life insurance policy to a Virginia resident. Under current rules in several states, the producer would have to have a Virginia license to sell a product to that Virginia resident. ACLI and NAIFA would prefer that a Virginia license not be necessary, and that, as long as the Virginia resident drive to Maryland to obtain the policy, the Maryland license would be sufficient.

What It Means to Agents:  If the NAIC were to agree to this interpretation, it would leave the policyholder without guaranty fund coverage should the insurer become insolvent because the policy was secured through a non-resident agent. As producers would not be required to disclose this material issue at the time of placement, it would not serve consumers to allow this interpretation. The Working Group has accepted this question and will work to formulate a response in the near future. PIA will follow this developing issue as it unfolds.