NU Online News Service, Jan. 19, 2:40 p.m. EST

WASHINGTON—The National Association of Professional Insurance Agents (PIA) is calling on Congress to strip the Obama administration of its authority to make recommendations to Congress regarding future oversight of the insurance industry.

But another insurance association said it would oppose such an initiative by Congress and called PIA "out of touch."

PIA contended in its statement that since any study and subsequent recommendations would be conducted by "federal bureaucrats," the results are preordained.

Instead, PIA said in its statement that such a study should be conducted by a "nonpartisan entity," such as the Government Accountability Office.

Under the Dodd-Frank financial services reform law, the Federal Insurance Office (FIO) is to conduct a study on insurance regulation and make recommendations.

But Fred Thomas, PIA president, said that it "is critical that this office not be permitted to conduct studies and make policy recommendations to Congress because it is clearly biased and will recommend that a vast new federal insurance bureaucracy be created. Congress needs to nip this in the bud right now."

Blain Reithmeier, a spokesman for the American Insurance Association (AIA), disagreed with PIA's statement.

"Any suggestion to defund this essential study is out of touch with the challenges facing the industry," said Mr. Rethmeier, AIA senior vice president of public affairs.

"We must increase the federal government's capacity to address insurance-related issues and this study will make a substantial contribution toward broadening and deepening our nation's understanding of the critical role insurance plays in our financial system," Mr. Reithmeier added.

PIA said in its statement that the study and subsequent recommendations, mandated by the new Dodd-Frank financial services reform law, should be "defunded" by Congress—that is, the money needed to conduct the study should not be appropriated.

"Federal bureaucrats should not be conducting a study on whether or not their own powers should be expanded and then making recommendations to Congress based on a study that they alone conducted," said Leonard Brevik, PIA executive vice president and CEO.

"Having the FIO report on, as the law currently states, 'the costs and benefits of potential federal regulation of insurance across various lines' creates an inherent conflict of interest," Mr. Brevik said.

"It assures a biased result because it asks federal regulators if they believe in federal regulation. Of course their answer will be 'yes.' Congress needs to defund this Trojan horse for federal expansion and encroachment," he said.

Mr. Brevik said the overriding concern is that the scope of authority of the FIO is "strictly limited by law."

He said the legislation creating it "clearly states, 'Nothing…shall be construed to establish or provide the office or the Department of the Treasury with general supervisory or regulatory authority over the business of insurance.'"

Mr. Brevik said that "authority remains where it belongs—with the states—despite the current attempt by the Obama administration to expand the FIO into an insurance policy-setting body, which exceeds its mandate."

He said the FIO is meant to serve as an information resource for policymakers and to coordinate international insurance agreements.

But Mr. Brevik said comments by Treasury Deputy Secretary Neal Wolin in London last November implied that the Treasury Department is putting forward "an interpretation that would vastly expand the office's activities beyond Congressional intent."

He referred to Mr. Wolin's comments as stating that the Obama administration believes the new financial services reform law "gives it the power to monitor the insurance sector and coordinate and develop federal policy on major domestic and international insurance issues."

Mr. Thomas said, "This is exactly what Congress did not want the FIO to do when it prohibited it from getting involved in insurance regulation. It is clear that the Obama administration is claiming an overly broad mandate for the FIO that is in direct conflict with the law."

AIA has argued in the past in favor of an optional federal charter.

PIA has opposed such a regulatory structure.