Consumers would benefit from reduced insurance licensing burdens
WASHINGTON (Oct. 13, 2016) – As policymakers at both the state and federal level examine ways to streamline and repeal burdensome occupational licensing laws, they should look at reforms to introduce more competition and choice to the market for insurance agents and brokers, according to a new policy study from R Street Institute Senior Fellow R.J. Lehmann.
“As numerous studies have demonstrated, there is little evidence this growing mountain of red tape has actually helped to protect the public, but significant research finding it has meant diminished opportunities for workers and entrepreneurs and mounting costs for consumers,” Lehmann writes.
The national ubiquity of insurance licensing requirements makes complete abolition an unrealistic prospect. Moreover, Lehmann details how independent insurance agents long have been a powerful political force that has resisted change. But he also notes positive developments in recent years, including the agent community’s support for the creation of the National Association of Registered Agents and Brokers, which should prove to streamline the process for interstate licensing significantly.
Lehmann lays out further reforms that should be on the agenda for consideration, including expanding the ability of savings banks to sell life insurance without a producer’s license, as is permitted in New York, Connecticut and Massachusetts; creating incentive programs to cut commissions in the federal crop insurance program; creating more limited line licenses for relatively “vanilla” insurance products, such as term life insurance; and abolishing regulations on the books in 48 states that bar agents and brokers from offering rebates to their customers.
“In insurance, as in nearly every field, it is the consumer who ultimately is king. As consumers come to expect more choice in how they buy insurance, the market inevitably will imagine new business models to provide that choice,” Lehmann concludes. “To keep up with their customers, agents and brokers will have to adapt. To stay in the good graces of the public they serve, lawmakers and regulators will have to do the same.”
