Fingerprint database's cost one of many industry concerns.

An initiative to create a "fingerprint repository" on insurance producers is advancing to a senior committee of the National Association of Insurance Commissioners, but questions about its future and how to pay for it linger.

The issue has been before the Fingerprint Subgroup of the NAIC's Market Regulation and Consumer Affairs Committee for more than two years. In that time, it has drawn the enthusiasm of some regulators who believe the mechanism ultimately would produce uniformity among states in producer licensing-and resistance from industry advocates, some of whom argue for dropping the proposal entirely.

The measure is a part of the "Authorization for Criminal History Record Check Model Act," which proposes to assist states in obtaining information from the FBI's Criminal Justice Information Services Division as they check for criminal histories among applicants to be insurance producers, officers and directors. Under federal law, states aren't permitted to issue producer licenses to known felons.

Currently, five volunteer states--Alaska, Idaho, Pennsylvania, California and New York are testing the system via a pilot program meant to provide a small-scale preview of a national system.

According to the NAIC, the initiative comes partly at the behest of the FBI, which has indicated to state insurance regulators on "many occasions" that one central entity for white-collar criminal background checks would be preferable to multiple entities.

How to create that entity has become the question.

At a special meeting in Fall 2005, the Producer Licensing Working Group approved the model law and forwarded the measure to its parent Market Regulation and Consumer Affairs Committee, headed by Iowa Insurance Commissioner Susan Voss. The move came just days after the Internal Administration Subcommittee approved the 2006 NAIC budget, which includes $54,091 over 2005 and 2006 to expand the fingerprint repository pilot project.

During the Nov. 3, 2005, budget hearing, Bill Boyd, financial regulation manager for the National Association of Mutual Insurance Companies, questioned the one-day notice of the tentative approval of funds for the database pilot, which, he said, was contrary to normal NAIC budget practices.

NAIC President-elect and Maine Insurance Superintendent Allessandro Iuppa said all notice rules were followed for the expenditure, which is meant to expand the number of participants in the pilot program.

Wes Bissett, senior vice president of government affairs and state relations for the Independent Insurance Agents & Brokers of America, said information about the existing pilot program has been sketchy at best.

"The NMC has never explained why there's a need for the NAIC, a private entity, to collect, store and maintain the fingerprints. We're talking about a database that would have fingerprints of millions of individuals. It seems premature that the NAIC would be funding this in the budget before there's been an independent discussion of the issues and a conversation as to whether the repository is even necessary"

Under the system, criminal record checks would remain with the states, while fingerprints obtained via the licensing process would be stored in a secure database. While authorized users of the database could obtain information on whether a certain producer's files are on record, state commissioners would maintain control over the fingerprint repository.