Tuesday, January 15, 2013

Checking in on Insurance Licensing

This blog - like the Coalition for Financial Security - - likes to keep tabs on the relationship between the regulation of financial professionals and Americans' access to the tools necessary to achieve the American Dream.  CFS's research has concluded that there are not enough financial professionals working in middle-class communities.  CFS's research has also shown that those most likely to work in middle-class communities are the least likely to get licensed as financial professionals.

Last year, we showed how state licensing regulations could change overnight simply because a new vendor administers licensing tests.  In that case, it got more difficult to get an insurance license in Ohio when a new tester came to town.  This month we will look at individual states.  

The chart below shows the first-time pass rate on the Life Insurance agent exam in Florida.  As the chart shows, one out of two testers passes the exam the first-time.   For comparison, in states like New Jersey, Illinois or Tennessee, the pass rate approaches 70 percent.   At points last year in Florida, the pass rate dipped into the mid-40s. 

Why do we see these differences in exams that are essentially measuring the same thing?  Are would-be agents in New Jersey or Tennessee smarter than would-be agents in Florida?  Doubtful. Do the states have different regulatory hurdles for the same profession? Apparently they do.  

The key question going forward are 1) should they; and 2) what is the impact on consumers?  These are questions that CFS continues to explore.