Thirteen insurance trade groups are urging Congress to exclude all lines of insurance from the Consumer Financial Protection Agency recently proposed by President Barack Obama and the U.S. Treasury Department.

Advocates of the new office say would add additional of protection at the federal level to guard consumers from problems in insurance and financial service products.

Timothy Geithner

In a letter to the chairmen and ranking members of the Senate Committee on Banking, Housing and Urban Affairs and the House Committee on Financial Services, as well as Treasury Secretary Timothy Geithner, the trade groups indicate that existing consumer protection standards are working and new, federal oversight could have “adverse unintended consequences.”

One of the group’s main points is that the authority of the CFPA would be overlaid over existing state regulations, resulting “in a duplicative regulatory regime with insurers, producers and consumers caught in the middle.”

“At a bare minimum, the CFPA will increase the potential for different and inconsistently-applied consumer protection standards for all insurers and producers, whether those insurers or producers do business locally, regionally, nationally, or globally,” the trade groups wrote.

The letter was sent on behalf of the Association for Advanced Life Underwriting, the American Council of Life Insurers, Agents for Change, the American Insurance Association, the American Land Title Association, the Consumer Credit Industry Association, The Council of Insurance Agents & Brokers, the National Association of Insurance and Financial Advisors, the National Association of Mutual Insurance Companies, the National Association of Independent Life Brokerage Agencies, NAVA (The Association for Insured Retirement Solutions), Professional Insurance Agents, and the Property Casualty Insurers Association of America.

“A good regulatory system should foster conditions that encourage investment, competition and innovation, and not perpetuate duplication, inconsistency, and waste,” the groups informed Congress.

The groups also point out that the proposed regulation’s cope of “financial activity” mistakenly includes mortgage, title and credit insurance and fear that other forms, such as someone deemed a “financial advisor” or assisting with tax planning could “also be swept under the CFPA’s jurisdiction.”

“The fact that some insurance protection covers risks surrounding a credit transaction does not alter the essence of the insurance product – a promise to provide protection in the event of a specified loss,” the groups wrote. “Given this distinction, no forms of insurance should be included within the CFPA mandate – including mortgage, title and credit insurance.”

The groups also took note of the term “business of insurance,” which has no statutory boundaries and could lead to the inclusion of other forms of insurance and that insurers do not collect demographic data about policyholder race or ethnicity, a current stipulation required by the CFPA.