At first glance, Senate Banking Committee Chair ChristopherDodd's plan to create an Office of National Insurance, incorporatedin his financial regulatory reform bill, might seem harmless.

As talk on Capitol Hill goes, most of the time, it will be outof sight and out of mind.

On the surface, the ONI would just be tasked to monitor theinsurance industry, coordinate international insurance issues andstudy ways to modernize insurance regulation.

But Sen. Dodd's bill, as it iscurrently drafted, would give the agency unprecedented subpoenapower and impose a duplicative layer of unnecessary and expensiveoversight to the property and casualty market that will ultimatelyresult in higher costs for consumers. The ONI could also createpotential conflicts with state insurance regulators.

Rather than providing assurance that our nation's financialservices system will be healthier, it actually poses the equivalentof a real health risk for an important sector of our economy.

Property and casualty insurers already have an effective, provensystem of state regulation that protects insurance consumers. Infact, p&c insurance is one of the most heavily regulatedfinancial services sectors in the United States.

State regulators enforce stringent solvency requirements,product regulation and post-sale safeguards for consumers. Ourindustry also has its own resolution process at the state levelthrough the existing system of state guaranty funds, which providesgreater consumer protections than even those found in the SenateBanking Committee's proposal.

Consumers come first in the p&c insurance sector. Ourindustry honors our promise to policyholders. Homeowners, motoristsand business owners have peace of mind that their policies will bepaid, even in the unlikely event of a company insolvency.

What's more, the Obama administration itself has alreadyeffectively argued against subjecting p&c insurers to awasteful additional layer of oversight. The administration's 2009white paper on the financial meltdown concluded that the insuranceindustry played no role in causing the current crisis.

There is plenty of independent scholarship as well,demonstrating that p&c insurers operate in a far less risky,different manner than the financial firms whose actions led to thefinancial meltdown.

A report by MSCI Barra, an independent consulting firm (http://www.mscibarra.com/), ranked35 various industry sectors by how much they were leveraged. Theinsurance industry ranked 28^th–near the bottom and wellbelow household products. By contrast, financial services firmsranked seventh.

Insurers are already subject to data collection by every stateinsurance department where they do business. Creation of an ONIwould lead to costly, duplicative data requests, and its preemptionpowers are not subject to adequate due process.

Furthermore, the proposed Office of Financial Research would adda third layer of disjointed information collection, which is aclassic example of unnecessary government redundancy.

The OFR would be tasked to collect information from bank holdingcompanies and nonbank financial institutions, as well as conducteconomic analysis on behalf of a new systemic risk watchdog–theFinancial Stability Oversight Council.

The OFR could impose unlimited, mandatory information collectionrequirements on the p&c insurance marketplace. Like the ONI, ittoo would broad subpoena power.

Unlike state regulators who understand how insurers collect andstore information, data requests from the ONI and OFR would have noaccountability and such requests could conflict with existing statelaws.

Every request for new information would mean extra money spentwith lawyers, consultants and more computer data services–a tabthat many smaller firms will be unable to afford. This makes for aninefficient use of resources and means less capital for job growthand product innovation. Make no mistake, data production is notcheap.

So the ONI might seem benign, and at the outset, all butinvisible. But in the end, it would be sort of like anappendix–it's unnecessary, and you never know it is there until itexplodes.

A better approach is the path the House of Representatives tookin December, when it added an important protection in the provisionto require the similarly structured Federal Insurance Office toobtain information from regulators where it has already beencollected, rather than asking companies to produce it a secondtime.

Another positive in the House measure is that it requires theFIO to demonstrate a need for information it may request, and to doa cost-benefit analysis to ensure companies are not undulyburdened.

While the more than 1,000 companies that comprise the PropertyCasualty Insurers Association of America support balanced,long-term solutions for addressing problems in the financialservices sector that led to the current economic crisis, we'reworried that the ONI proposal could present major unintendedconsequences–with no benefit to consumers.

Duplicative oversight for p&c insurance would only createadditional costs, add red tape and hurt policyholders.

Congress will return from recess with a full agenda moving intomidterm elections. Last month, the Senate Banking Committee passedSen. Dodd's bill on a party-line vote, and the legislation willlikely move to the Senate floor soon.

PCI continues to work to promote the viability of a competitiveprivate insurance market and protect insurance policyholders. Weurge a balanced approach as financial services regulatory reformlegislation moves forward in the Senate that protects consumerswhile promoting market efficiency.

David A. Sampson is president and CEO of theProperty Casualty Insurers Association of America in Des Plaines,Ill.