Friday, August 14, 2015

Producer Licensing Snapshot - Ohio

The Coalition for Financial Security (CFS) recently completed research into the licensing of insurance agents in Ohio.  Using FOIA documents from several states and other public information, the research suggests Ohioans seeking a license to work in insurance have to jump over higher regulatory hurdles than their neighbors. These regulatory hurdles have negative consequences for job-seekers and consumers in the Buckeye state, and regulators may want to consider action.

The research is summarized in the following three charts.

The first chart uses information from the Department’s annual reports and the U.S. Census Bureau to document a decline in the number of Ohio insurance agents, even as the state’s overall population has grown.

The second chart compares first-time pass rates on insurance licensing exams in Ohio, Pennsylvania and Wisconsin (where available) on three major exam lines:  (1) Life, (2) Life, Accident & Health and (3) Property & Casualty.  All three states use the same exam vendor, Prometric.  (Wisconsin contracted with Prometric in 2014.) Note from the chart that Ohio consistently has the lowest pass rate on the various licensing exams. 

The final chart includes excerpts from memos sent by exam vendor Prometric to both the Ohio department and the Pennsylvania department.  The excerpts make clear that Prometric sets exam difficulty in each state based on what pass rates regulators find "acceptable."  If regulators want a higher or lower pass rate, the memo says they can adjust the difficulty. 

One can reasonably conclude from these memos and the pass rates in Ohio and other states that regulators in Ohio have have chosen a different difficulty for their exams.   In light of the declining population of insurance agents, Ohio may want to work with Prometric to ensure the bar to enter the insurance profession in Ohio is the same as it is in Pennsylvania and Wisconsin, or to at least determine if there is a public policy reason for it to be different.  Jobs and consumers' access to insurance products are at stake.

Importantly, it appears Ohio can reducde its licensing burden without jeopardizing consumer protection.  Looking at state consumer complaint ratios, there appears to be no correlation between exam pass rates and consumer protection.  There is, however, strong evidence that the consumers will benefit from a more robust agent population.  A 2010 LIMRA survey the life insurance market found that “almost eight in 10 U.S. households currently do not have a personal life insurance agent or broker to turn to and most of them say they never did.”  The recent licensing report from the White House (noted in previous blog entry) also suggested unnecessary licensing hurdles "[raise] costs for consumers." 

Finally, it is interesting to note that the vast majority of licensed agents working in Ohio are non-resident agents.  Thus any extra hurdles in Ohio would have very little impact on consumers, as many are working with agents licensed in other states. Indeed, instead of bringing consumers added protection, extra hurdles may in fact only be punishing Ohio residents. 

Tuesday, August 11, 2015

Florida Tries Again for Financial Literacy

The Florida legislature has been unable to pass financial literacy legislation for the past few sessions.  When they did pass a pilot program in 2015, it received a veto from the Governor.  Newspapers report today that Sen Dorothy Hukill is going to try again in 2016.
Sen. Dorothy Hukill, a Volusia County Republican, again proposes to require a half-credit of financial literacy as a graduation requirement. (SB 96)
Good for her!