Insurance regulation in a nutshell

(c)Title III – Insurance Producers and Other Insurance Servicing Persons

Licensing, Examination and Reporting. Title III provides for federal licensing of insurance producers and National Agencies. A federal producer license may authorize a person to sell, solicit or negotiate surplus lines and nonadmitted insurance. The NIA provides that a federal producer license allows a person to “sell, solicit, or negotiate insurance in any state for any line or lines of insurance specified in such license.” An insurance producer licensed by a state may sell, solicit, or negotiate insurance in each state on behalf of a National Insurer without a federal producer license. Federally licensed insurance producers are subject to examination and reporting requirements. The NIA would also bar states from regulating insurance adjusters, reinsurance intermediaries and third party administrators that act for National Insurers.
Supervision. The NIA includes provisions relating to supervision of the sales and marketing practices of a federally licensed insurance producer that is an individual. A National Insurer has a duty to supervise such a person with respect to the sale, solicitation or negotiation of its insurance policies if (i) the producer is an employee or agent, and (ii) the entire or principal activity of the producer is devoted to these acts for the National Insurer. Similarly, a National Agency or other federally licensed insurance producer (each effectively acting as a general agent) has the duty to supervise such a person with respect to the sale, solicitation or negotiation of the insurance policies of a National Insurer if (i) the producer is an employee of the National Agency or other federally licensed insurance producer, and the sale, solicitation, and negotiation of insurance is within the scope of employment of the producer; or (ii) the producer is an agent of the National Agency or other federally licensed insurance producer, and the sale, solicitation, and negotiation of insurance is pursuant to the terms of an agreement between the agent and the National Agency or other federally licensed insurance producer. If a federally licensed insurance producer is not subject to supervision by a National Insurer, National Agency or other federally licensed insurance producer under either of these rules, then that producer will be subject to the direct oversight of the Commissioner.
The Commissioner is required to establish, by regulation, standards for supervision which are not to conflict with the rules of the NASD. This will assure that, with respect to the sale of variable contracts by National Life Insurers, the insurance supervision rules under the NIA are not in conflict with existing federal securities law supervision rules.
Lastly, the above supervision rules will not apply to a wholesale life insurance brokerage agency as that term is defined by the Commissioner.