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INSURANCE REGULATOR ACCESS TO CRIMINAL RECORDS

THE ISSUE IS. Providing a mechanism for insurance regulators to have access to the Federal Bureau of Investigation (FBI) criminal record database.

IT'S IMPORTANT BECAUSE. Individuals in the insurance business have access to tremendous amounts of money. Thus, those in charge of insurance operations have an obligation to their policyholders, customers, and stockholders to ensure that these assets are handled legally and responsibly. Congress recognized this fact several years ago with the passage of the Insurance Fraud Prevention Act, which makes it a crime to employ felons in the insurance industry and specifically gives state regulatory agencies the responsibility for determining whether a convicted felon may re-enter the insurance business.

Currently, state insurance regulators do not have clear authority to access FBI criminal records regarding individuals who are employed or who are seeking employment in the insurance business. In fact, insurance departments are the only government regulators who do not have access to FBI criminal background histories for potential or current employees. However, banking and securities regulators have had this type of authority for many years. Additionally, in recent years, operators of nursing homes and other groups have been granted statutory authority to check personal background information of service providers against the FBI's national database.

In addition, the Gramm-Leach-Bliley Act (GLBA) required a majority of states and territories to enact either reciprocity agreements or adopt a uniform producer-licensing act by November of 2002. Under the reciprocity provisions, a state must agree to several components in licensing non-resident producers. However, state insurance regulators need access to the FBI criminal record database in order to have a producer licensing system that achieves uniformity and effectively protects consumers.

In the 107th Congress, Congressman Mike Rogers (R-MI) who is currently a deputy whip in the House introduced HR 1408, the "Financial Services Antifraud Network Act of 2001". That Bill which passed the House but died in the Senate, would have required financial regulators to develop networking procedures for the sharing of antifraud information; and coordinate to further improve upon the antifraud efforts of network participants.

NAMIC POSITION. NAMIC supports legislation that provides state insurance regulators with access to the necessary FBI criminal records. With the enactment of the Insurance Fraud Prevention Act and the uniform producer licensing initiative, it is now more important than ever for insurers to possess a mechanism for checking the backgrounds of potential and current employees. The fact that other industry sectors, such as banking, securities, and nursing homes, are able to check backgrounds demonstrates its importance. The ability of insurance regulators to access FBI criminal records will be an important tool in the fight against insurance fraud.

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