Mr. Hughes said that while the market conduct section of the OFC bill now is limited, "it is only a placeholder and a system will be developed in the future."

In addition, the bill will require comprehensive financial exams for all companies. "That is not something that exists today," he said.

But proponents of the current state system said that a dual system would create confusion and new costs for consumers when the time comes that they have a complaint.

"We will not stand by and let a system of regulatory arbitrage develop," Mr. Hunter said, "because the insurers will always choose a lapdog over a watchdog."

Neil Alldredge, senior state advocacy director for the National Association of Mutual Insurance Companies, said that while the federal government will make an honest effort to serve consumers, in the end there will not be an infrastructure as accessible as the current state system.

Portions of the property-casualty industry are opposing the bill, even though it would eliminate rate regulation and only require what critics describe as limited regulation of forms.

Leonard Brevik, executive vice president of the National Association of Professional Insurance Agents, said that a dual regulatory system led to tragic results in the form of a $150 billion bailout of the savings and loan industry in the 1980s.

"A federal insurance charter will allow large financial services entities with insurance operations to move in and out of markets--anything from several territories to entire regions of the country--solely at their whim, thereby disrupting markets and diminishing, not enhancing, options for consumers," Mr. Brevik said.