Michigan Office of Administrative Hearings and Rules

611 West Ottawa Street; 2nd Floor, Ottawa Building

Lansing, MI 48933

Phone: (517) 335-8658 FAX: (517) 335-9512

REGULATORY IMPACT STATEMENT

and COST-BENEFIT ANALYSIS (RISCBA)

PART 1: INTRODUCTION

Under the Administrative Procedures Act (APA), 1969 PA 306, the agency that has the statutory authority to

promulgate the rules must complete and submit this form electronically to the Michigan Office of

Administrative Hearings and Rules (MOAHR) at o’berryd@michigan.gov no less than 28 days before the

public hearing.

1. Agency Information

Agency name: Department of Insurance and Financial Services

Division/Bureau/Office: Office of Insurance Licensing and Market Conduct

Name, title, phone number, and e-mail of person completing this form:

Paige McCully, Manager

of Insurance Licensing,

517-284-8648,

mccullyp@michigan.gov

Name of Departmental Regulatory Affairs Officer reviewing this form: Sarah Wohlford

2. Rule Set Information

MOAHR assigned rule set number: 2019-038 IF

Title of proposed rule set:

Pre-licensure Education Rules

PART 2: KEY SECTIONS OF THE APA

MCL 24.207a “Small business” defined.

Sec. 7a. “Small business” means a business concern incorporated or doing business in this state, including

the affiliates of the business concern, which is independently owned and operated, and which employs fewer

than 250 full-time employees or which has gross annual sales of less than $6,000,000.00.

MCL 24.232 (8) Except for an emergency rule promulgated under section 48, and subject to subsection (10),

if the federal government has mandated that this state promulgate rules, an agency shall not adopt or

promulgate a rule more stringent than the applicable federally mandated standard unless the director of the

agency determines that there is a clear and convincing need to exceed the applicable federal standard.

(9) Except for an emergency rule promulgated under section 48, and subject to subsection (10), if the

federal government has not mandated that this state promulgate rules, an agency shall not adopt or promulgate

a rule more stringent than an applicable federal standard unless specifically authorized by a statute of this

state or unless the director of the agency determines that there is a clear and convincing need to exceed the

applicable federal standard.

(10) Subsections (8) and (9) do not apply to the amendment of the special education programs and services

rules, R 340.1701 to R 340.1862 of the Michigan Administrative Code. However, subsections (8) and (9) do

apply to the promulgation of new rules relating to special education with the rescission of R 340.1701 to R

340.1862 of the Michigan Administrative Code.

MCL 24.240 Reducing disproportionate economic impact of rule on small business; applicability of

section and MCL 24.245(3).

Sec. 40. (1) When an agency proposes to adopt a rule that will apply to a small business and the rule will

have a disproportionate impact on small businesses because of the size of those businesses, the agency shall

Revised: April 22, 2019

MCL 24.245(3)

RISCBA – Page 2

consider exempting small businesses and, if not exempted, the agency proposing to adopt the rule shall reduce

the economic impact of the rule on small businesses by doing all of the following when it is lawful and

feasible in meeting the objectives of the act authorizing the promulgation of the rule:

(a) Identify and estimate the number of small businesses affected by the proposed rule and its probable

effect on small businesses.

(b) Establish differing compliance or reporting requirements or timetables for small businesses under the

rule after projecting the required reporting, record-keeping, and other administrative costs.

(c) Consolidate, simplify, or eliminate the compliance and reporting requirements for small businesses

under the rule and identify the skills necessary to comply with the reporting requirements.

(d) Establish performance standards to replace design or operational standards required in the proposed rule.

(2) The factors described in subsection (1)(a) to (d) shall be specifically addressed in the small business

impact statement required under section 45.

(3) In reducing the disproportionate economic impact on small business of a rule as provided in

subsection (1), an agency shall use the following classifications of small business:

(a) 0-9 full-time employees.

(b) 10-49 full-time employees.

(c) 50-249 full-time employees.

(4) For purposes of subsection (3), an agency may include a small business with a greater number of

full-time employees in a classification that applies to a business with fewer full-time employees.

(5) This section and section 45(3) do not apply to a rule that is required by federal law and that an agency

promulgates without imposing standards more stringent than those required by the federal law.

MCL 24.245 (3) Except for a rule promulgated under sections 33, 44, and 48, the agency shall prepare and

include with the notice of transmittal a regulatory impact statement which shall contain specific information

(information requested on the following pages).

PART 3: AGENCY RESPONSE

Please provide the required information using complete sentences. Do not answer any question with “N/A”

or “none.”

Comparison of Rule(s) to Federal/State/Association Standards:

1. Compare the proposed rule(s) to parallel federal rules or standards set by a state or national licensing agency

or accreditation association, if any exist.

There are no parallel federal rules or standards set by a state or national licensing agency or

accreditation association.

A. Are these rule(s) required by state law or federal mandate?

Yes. These rules are mandatory under MCL 500.1204a(1)(d), which requires the Director of the

Department of Insurance and Financial Services to promulgate rules prescribing the criteria that

must be met by a person to render instruction in a registered insurance producer program of study;

and MCL 500.1204a(3), which requires the Director to promulgate rules prescribing the subject

matter that a program of study must possess to qualify for registration for an insurance producer

program of study. MCL 500.1204a was amended in Public Act 575 of 2008 to substantially adopt

the National Association of Insurance Commissioners (NAIC) Uniform Producer Licensing

Model Act, which was itself amended to comply with the 1999 federal Gramm-Leach-Bliley Act,

which required that states enact uniform provisions for licensing insurance agents (producers) and

businesses.

Revised: April 22, 2019

MCL 24.245(3)

RISCBA – Page 3

B. If these rule(s) exceed a federal standard, identify the federal standard or citation, describe why it is

necessary that the proposed rule(s) exceed the federal standard or law, and specify the costs and benefits

arising out of the deviation.

There is no applicable federal standard.

2. Compare the proposed rule(s) to standards in similarly situated states, based on geographic location,

topography, natural resources, commonalities, or economic similarities.

The proposed amendments that related to course content, hour, and method of instruction requirements

will result in rules that are uniform across similarly situated states. As described in #1, the statute that

provides authority to promulgate these rules was amended in 2009 to comply with federal uniformity

requirements regarding insurance producer and business licensing. The amendment requiring education

instructors to self-report certain events is not contained in the uniform standards, but is based directly on

the language in MCL 500.1204a(5), which lists the same events that may provide a basis for the

Director to suspend or revoke an instructor’s approval.

A. If the rule(s) exceed standards in those states, explain why and specify the costs and benefits arising

out of the deviation.

The only aspect of the rule that exceeds standards in similarly situated states is the self-reporting

requirement in proposed amendments to R 500.6. The cost of this requirement is negligible; the

benefits are significant because it will allow more efficient notification of these events.

3. Identify any laws, rules, and other legal requirements that may duplicate, overlap, or conflict with the

proposed rule(s).

There are no laws, rules, or other legal requirements that duplicate, overlap, or conflict with the

proposed rules.

A. Explain how the rule has been coordinated, to the extent practicable, with other federal, state, and

local laws applicable to the same activity or subject matter. This section should include a discussion of

the efforts undertaken by the agency to avoid or minimize duplication.

There are no federal, state, or local laws applicable to the same activity or subject matter, so no

efforts to avoid or minimize duplication have been taken.

4. If MCL 24.232(8) applies and the proposed rule(s) is more stringent than the applicable federally mandated

standard, a statement of specific facts that establish the clear and convincing need to adopt the more

stringent rule(s) and an explanation of the exceptional circumstances that necessitate the more

stringent standard is required below:

There is no applicable federally mandated standard.

5. If MCL 24.232(9) applies and the proposed rule(s) is more stringent than the applicable federal standard,

either the statute that specifically authorizes the more stringent rule(s) or a statement of the specific

facts that establish the clear and convincing need to adopt the more stringent rule(s) and an

explanation of the exceptional circumstances that necessitate the more stringent standard is required

below:

There is no applicable federally mandated standard.

Purpose and Objectives of the Rule(s):

6. Identify the behavior and frequency of behavior that the proposed rule(s) are designed to alter.

The proposed rule changes are designed to ensure that insurance education instructors are approved in

accordance with the provisions of the Insurance Code; to allow for self-study in pre-licensing education

courses, given the increased availability of online courses; ensure that all candidates for licensure have

completed a final examination; and to ensure that all applicants for licensure have successfully

Revised: April 22, 2019

MCL 24.245(3)

RISCBA – Page 4

completed a uniform series of courses. The proposed rule will also ensure that education instructors are

competent and trustworthy, by ensuring that they obtain the approval of the Director of the Department

of Insurance and Financial Services prior to providing services.

A. Estimate the change in the frequency of the targeted behavior expected from the proposed rule(s).

DIFS estimates that all applicants for licensure and all education instructors will comply with the

proposed amendments.

B. Describe the difference between current behavior/practice and desired behavior/practice.

The current rule has outdated provisions on the content and number of hours required for pre-

licensing education courses, and does not expressly allow for online study. It also lacks a

provision requiring education instructors to self-report certain events.

C. What is the desired outcome?

The desired outcome is that all applicants for licensure receive thorough and uniform education;

that all education instructors obtain approval from the Director prior to providing services; and

that all approved instructors self-report events that could result in the suspension or revocation of

their license.

7. Identify the harm resulting from the behavior that the proposed rule(s) are designed to alter and the likelihood

that the harm will occur in the absence of the rule.

If left in their current form, the rules would conflict with the Insurance Code’s hour and content

requirements for pre-licensure education courses.

A. What is the rationale for changing the rule(s) instead of leaving them as currently written?

The proposed amendments are necessary to reflect statutory amendments: 1) the elimination of

the Agent Education Advisory Council by PA 67 of 2017; and 2) updating the number of hours

required for certain programs of study, as necessitated by 2009 amendments to Section 1204a of

the Insurance Code, MCL 500.1204a. The proposed amendments would also allow individuals to

take online courses; and would require education providers to fulfill reporting requirements to

DIFS. These two amendments reflect the current state of the education market by allowing for

online courses; and ensure that education providers remain in compliance with all applicable laws.

8. Describe how the proposed rule(s) protect the health, safety, and welfare of Michigan citizens while

promoting a regulatory environment in Michigan that is the least burdensome alternative for those required

to comply.

Requiring education instructors to self-report violations will protect license applicants from unscrupulous

education instructors and ensure that they have access to comprehensive courses. Consumers will

ultimately benefit from having access to licensed insurance producers who have been educated by reliable

instructors in all relevant areas of law.

9. Describe any rules in the affected rule set that are obsolete or unnecessary and can be rescinded.

There are no rules in the affected rule set that are obsolete or unnecessary.

Fiscal Impact on the Agency:

Fiscal impact is an increase or decrease in expenditures from the current level of expenditures, i.e. hiring

additional staff, higher contract costs, programming costs, changes in reimbursement rates, etc. over and above

what is currently expended for that function. It does not include more intangible costs or benefits, such as

opportunity costs, the value of time saved or lost, etc., unless those issues result in a measurable impact on

expenditures.

Revised: April 22, 2019

MCL 24.245(3)

RISCBA – Page 5

10. Describe the fiscal impact on the agency (an estimate of the cost of rule imposition or potential savings).

These changes should have no fiscal impact on the agency. There may be a very limited number of

education instructors reporting events that may give rise to suspension or revocation of their approval,

and requesting approval to take a licensing examination; however, these events will not impose

significant, if any, costs.

11. Describe whether or not an agency appropriation has been made or a funding source provided for any

expenditures associated with the proposed rule(s).

Funding sources will not be necessary because there is no significant, if any, fiscal impact on the

agency.

12. Describe how the proposed rule(s) is necessary and suitable to accomplish its purpose, in relationship to the

burden(s) it places on individuals. Burdens may include fiscal or administrative burdens, or duplicative acts.

The rule changes are necessary to align the rule set with federal law, the Insurance Code and to be

consistent with standards in other states; no additional burdens are anticipated.

A. Despite the identified burden(s), identify how the requirements in the rule(s) are still needed and

reasonable compared to the burdens.

No additional burdens are anticipated.

Impact on Other State or Local Governmental Units:

13. Estimate any increase or decrease in revenues to other state or local governmental units (i.e. cities,

counties, school districts) as a result of the rule. Estimate the cost increases or reductions for such other

state or local governmental units as a result of the rule. Include the cost of equipment, supplies, labor, and

increased administrative costs in both the initial imposition of the rule and any ongoing monitoring.

There are no effects on revenues to other state or local governmental units.

A. Estimate the cost increases or reductions for other state or local governmental units (i.e. cities,

counties, school districts) as a result of the rule. Include the cost of equipment, supplies, labor, and

increased administrative costs in both the initial imposition of the rule and any ongoing monitoring.

There are no effects on costs for other state or local governmental units.

14. Discuss any program, service, duty or responsibility imposed upon any city, county, town, village, or school

district by the rule(s).

The rules do not impose any program, service, duty, or responsibility on any city, county, town, village,

or school.

A. Describe any actions that governmental units must take to be in compliance with the rule(s). This

section should include items such as record keeping and reporting requirements or changing operational

practices.

The rules do not require any action to be taken by any governmental units other than DIFS.

15. Describe whether or not an appropriation to state or local governmental units has been made or a funding

source provided for any additional expenditures associated with the proposed rule(s).

There are no impacts to state or local governmental unit expenditures.

Rural Impact:

16. In general, what impact will the rule(s) have on rural areas?

Revised: April 22, 2019

MCL 24.245(3)

RISCBA – Page 6

The rules will have an impact on rural areas only to the extent pre-licensure education providers are

located in rural areas and will need to comply with the amended rules. There will be no disparate

impacts on those providers.

A. Describe the types of public or private interests in rural areas that will be affected by the rule(s).

No public or private interests in rural areas will be affected by the rules.

Environmental Impact:

17. Do the proposed rule(s) have any impact on the environment? If yes, please explain.

The proposed rules do not have any impact on the environment.

Small Business Impact Statement:

18. Describe whether and how the agency considered exempting small businesses from the proposed rule(s).

DIFS did not consider whether to exempt small businesses from the rules because it is critical that the

requirements applicable to insurance courses and education providers be consistent across providers,

regardless of their size.

19. If small businesses are not exempt, describe (a) how the agency reduced the economic impact of the

proposed rule(s) on small businesses, including a detailed recitation of the efforts of the agency to comply

with the mandate to reduce the disproportionate impact of the rule(s) upon small businesses as described

below, per MCL 24.240(1)(a)-(d), or (b) the reasons such a reduction was not lawful or feasible.

The rules do not impose a significant economic impact on education providers, so DIFS did not

consider a reduction in that impact to be desirable, given the importance of consistency and uniformity.

A. Identify and estimate the number of small businesses affected by the proposed rule(s) and the

probable effect on small business.

There approximately 20-25 education providers providing services in Michigan; of this number,

DIFS is not aware of how many constitute small businesses. However, because the costs of

compliance are anticipated to be very low, if not nonexistent, and because the rules will result in

consistency across states, there should be no disparate impact on providers, regardless of their

size.

B. Describe how the agency established differing compliance or reporting requirements or timetables

for small businesses under the rule after projecting the required reporting, record-keeping, and other

administrative costs.

DIFS did not establish different compliance or reporting requirements or timetables for small

businesses.

C. Describe how the agency consolidated or simplified the compliance and reporting requirements for

small businesses and identify the skills necessary to comply with the reporting requirements.

DIFS did not consolidate or simplify the compliance and reporting requirements for small

businesses.

D. Describe how the agency established performance standards to replace design or operation

standards required by the proposed rule(s).

There are no such design or operation standards required by the proposed rules.

20. Identify any disproportionate impact the proposed rule(s) may have on small businesses because of their size

or geographic location.

Revised: April 22, 2019

MCL 24.245(3)

RISCBA – Page 7

The size and location of an education provider that is also a small business will not affect the impact on

that provider.

21. Identify the nature of any report and the estimated cost of its preparation by small businesses required to

comply with the proposed rule(s).

These changes do not require the preparation of any formal reports. Education instructors that need to

report violations of laws will do so in a method of their own choosing; there is no form that will be

promulgated to effectuate this requirement.

22. Analyze the costs of compliance for all small businesses affected by the proposed rule(s), including costs

of equipment, supplies, labor, and increased administrative costs.

There should be no additional costs associated with these changes.

23. Identify the nature and estimated cost of any legal, consulting, or accounting services that small businesses

would incur in complying with the proposed rule(s).

There should be no additional costs associated with these changes.

24. Estimate the ability of small businesses to absorb the costs without suffering economic harm and without

adversely affecting competition in the marketplace.

There should be no additional costs associated with these changes.

25. Estimate the cost, if any, to the agency of administering or enforcing a rule that exempts or sets lesser

standards for compliance by small businesses.

Administering a rule that exempted or set lesser standards for compliance by small businesses would

result in approximately double the costs to the agency because it would result in the enforcement of

two separate rule sets, and the continual monitoring of two different sets of regulated entities: small

businesses and non-small businesses.

26. Identify the impact on the public interest of exempting or setting lesser standards of compliance for small

businesses.

The public interest would be negatively affected by exempting or setting lesser standards of

compliance for small businesses. If small businesses were exempt or subject to lesser standards, then

the education requirements for pre-licensure applicants would differ and consumers could be adversely

affected because licensees who did not take the full complement of classes would be less educated than

other licensees.

27. Describe whether and how the agency has involved small businesses in the development of the proposed

rule(s).

Small businesses were not involved in the development of the rules.

A. If small businesses were involved in the development of the rule(s), please identify the business(es).

Not applicable.

Cost-Benefit Analysis of Rules (independent of statutory impact):

28. Estimate the actual statewide compliance costs of the rule amendments on businesses or groups.

There should be no additional compliance costs associated with these changes.

A. Identify the businesses or groups who will be directly affected by, bear the cost of, or directly benefit

from the proposed rule(s).

Education instructors and applicants for licenses will be directly affected by, and will directly

benefit from, these rules.

Revised: April 22, 2019

MCL 24.245(3)

RISCBA – Page 8

B. What additional costs will be imposed on businesses and other groups as a result of these proposed

rules (i.e. new equipment, supplies, labor, accounting, or recordkeeping)? Identify the types and

number of businesses and groups. Be sure to quantify how each entity will be affected.

There should be no additional costs imposed on businesses and other groups as a result of these

proposed rules.

29. Estimate the actual statewide compliance costs of the proposed rule(s) on individuals (regulated individuals

or the public). Include the costs of education, training, application fees, examination fees, license fees, new

equipment, supplies, labor, accounting, or recordkeeping.

The actual statewide compliance costs of the proposed rule changes on the regulated individuals would

be limited to those approved education instructors that have to report unacceptable activity to DIFS, or

request to take a licensing examination. These costs would be negligible.

A. How many and what category of individuals will be affected by the rules?

There are 73 pre-licensing education instructors approved to teach in the state.

B. What qualitative and quantitative impact does the proposed change in rule(s) have on these

individuals?

These individuals will be held accountable for their actions/activities.

30. Quantify any cost reductions to businesses, individuals, groups of individuals, or governmental units as a

result of the proposed rule(s).

There should be no cost reductions to businesses, individuals, groups of individuals, or governmental units

as a result of the proposed rules.

31. Estimate the primary and direct benefits and any secondary or indirect benefits of the proposed rule(s).

Provide both quantitative and qualitative information, as well as your assumptions.

The primary and direct benefit of the rule is the assurance that education instructors are held to a

minimum standard of accountability for their actions, and that applicants complete the required number

of hours, in the required content areas, required for licensure.

32. Explain how the proposed rule(s) will impact business growth and job creation (or elimination) in Michigan.

These proposed rule changes will not impact business growth or job creation in Michigan.

33. Identify any individuals or businesses who will be disproportionately affected by the rules as a result of their

industrial sector, segment of the public, business size, or geographic location.

No individuals or businesses will be disproportionately affected by the proposed rule changes.

34. Identify the sources the agency relied upon in compiling the regulatory impact statement, including the

methodology utilized in determining the existence and extent of the impact of a proposed rule(s) and a

cost-benefit analysis of the proposed rule(s).

The agency relied upon the following sources in compiling the regulatory impact statement:

Revisions and Clarifications to the Uniform Licensing Standards:

https://www.naic.org/documents/committees_ex_pltf_producer_licensing_ul_standards_revised.pdf

(for information regarding uniform course requirements for question #2).

Internal DIFS database (Obase): for information regarding existing number of education providers for

question #19A and number of education instructors for question #29A.

Revised: April 22, 2019

MCL 24.245(3)

RISCBA – Page 9

A. How were estimates made, and what were your assumptions? Include internal and external sources,

published reports, information provided by associations or organizations, etc., which demonstrate a

need for the proposed rule(s).

Estimates were made based upon the number of individuals affected by the proposed rule changes

and what will be required of them.

Alternatives to Regulation:

35. Identify any reasonable alternatives to the proposed rule(s) that would achieve the same or similar goals.

Include any statutory amendments that may be necessary to achieve such alternatives.

There are no reasonable alternatives to the proposed rule amendments because the requirements related

to pre-licensure education are mandated to be included in rulemaking. See MCL 500.1240a(3).

A. In enumerating your alternatives, include any statutory amendments that may be necessary to

achieve such alternatives.

Because these rules are mandatory, there are no statutory amendments that could achieve the

same result.

36. Discuss the feasibility of establishing a regulatory program similar to that in the proposed rule(s) that would

operate through private market-based mechanisms. Include a discussion of private market-based systems

utilized by other states.

Private market-based mechanisms are not appropriate here because insurance pre-licensure education

requirements are expressly left to state regulation.

37. Discuss all significant alternatives the agency considered during rule development and why they were not

incorporated into the rule(s). This section should include ideas considered both during internal discussions

and discussions with stakeholders, affected parties, or advisory groups.

There were no significant alternatives that the agency considered.

Additional Information:

38. As required by MCL 24.245b(1)(c), describe any instructions on complying with the rule(s), if applicable.

There are no instructions on complying with the rules.

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↓ To be completed by the MOAHR ↓

PART 4: REVIEW BY THE MOAHR

Date RISCBA received: 5-20-19/7-12-19

Date RISCBA approved:

7/12/19

Date of disapproval:

Explanation:

Revised: April 22, 2019

MCL 24.245(3)