Each guild or clan could have a set of distinct insignia that would be different from other guilds.clans and would award their members of higher ranks to show their distinction from oether members.
Low level could have no insignia or a common insignia for the guild/clan that would identify the owner as a low rank member of the guild/clan.
Thus you could know the guild/clan of an NPC and his/her rank in that guild/clan in a glance if you knew the meaning of that insignia, and there could be books on the subject for each guild/clan.
Of course, some guild/clans would not want to reveal their identity, so they would not have such visible marks on their members, but others would have them and wear them with pride.
As for player characters, whenever you reached a significant rank in a guild or clan you could be awarded with such an insignia that you could attach to any cloth or armor and it would show on the specific place of that cloth or armor.
You could remove that insignia any time you liked and attach it to another armor, and if you sell the armor with attached insignia to a vendor, the insignia would be automatically removed from the armor and added to your inventory, ready to be attached to another armor.
In some more formal/strict guilds/clans, when attending official guild/clan gathering or private meetings, you should wear your insignia in order to be able to join the others, or in order to avoid chiding from other members, kinda like the imperial legion in Morrowind.
When you advance in rank in a guild, you are told to give in your old insignia, and a new one is given to you, and if you are expelled from a guild, your insignia is taken from you.
All in all, it can be a mark of distinction in the world of Nirn, and should be worn with pride, and in some quests could be checked to result in a specific branch of the quest line different from whether you had not worn your specific insignia.
So what is your opinions on this matter?
Edit: here are http://www.williamscully.ca/gallery2/d/12525-2/WSL_rank_insignia.jpg http://historyscoop.files.wordpress.com/2007/03/army-insignia.jpg that I dag out of the internet.