A leading consumer advocate with hands-on experience in both state and federal oversight–Consumer Federation of America Insurance Director J. Robert Hunter–is blasting a recently introduced U.S. Senate measure to give carriers and producers the choice of a national license.

The comments by Mr. Hunter–a former Texas insurance commissioner and federal insurance administrator–were sparked by the introduction earlier this month by Senators John Sununu, R-N.H., and Tim Johnson, D-S.D., of an optional federal charter bill for insurers and intermediaries.

Mr. Hunter called the Johnson-Sununu bill “a wish list of regulatory giveaways promoted for years by large insurance companies that would be extraordinarily harmful to consumers.”

“In the name of regulatory 'uniformity' the bill accomplishes the unlikely feat of lowering consumer standards for insurance policyholders below the already weak protections that exist in many states,” Mr. Hunter added. “Meanwhile, it allows insurers to play federal and state regulators off each other in an effort to keep regulatory standards low.”

Mr. Hunter criticized the bill for establishing a federal regulator with what he considers “little, if any, authority to regulate insurance rates, and a limited ability to regulate the form of insurance policies, regardless of how uncompetitive the market for a particular line of insurance might be.”

Additionally, he argued that allowing insurers to choose their regulatory structure–state or federal–would prove to be problematic for consumers.

“Consumer organizations strongly oppose an optional federal charter that allows the regulated entity, at its sole discretion, to pick its regulator,” he said. “This is a prescription for regulatory arbitrage that can only undermine needed consumer protections.”

An enthusiastic supporter of the federal charter approach–the American Insurance Association–led the counterattack to Mr. Hunter's criticism of the bill.

AIA's senior vice president and general counsel, J. Stephen Zielezienski, described Mr. Hunter as a believer in “dysfunctional, heavy-handed government price and product controls that distort and wreak havoc on insurance markets.” He said the act includes many strong protections, including federal antitrust laws.

Mr. Zielezienski called Mr. Hunter's comments “misleading” and said his criticisms reflect an “uninformed viewpoint about the legislation and how consumers are best served and protected in the financial services marketplace.”

“Clearly, [Mr. Hunter] does not appreciate–or perhaps simply chooses to ignore–the many strong consumer protections at the center of the National Insurance Act,” said Mr. Zielezienski.

“Consumer protection would be ensured because the proposed national regulatory structure would focus strongly on both insurer solvency (to make sure consumer claims can be paid) and market conduct (to identify and quickly deal with bad actors),” he added. “These are the most meaningful forms of consumer protection.

Equally important, he said, for those insurers that choose to be nationally chartered, “state rate regulation is exchanged for a real consumer protection–application of the federal antitrust laws.”

He added that the legislation would “create a regulatory system akin to the dual banking system, which has been a successful model for more than 140 years.”