MINNEAPOLIS—Insurance trade groups have told the nation’s insurance regulators the work of financial rating firms is unsatisfactory, but it’s not a job the regulators should attempt.

 At the National Association of Insurance Commissioners Summer Meeting industry liaison session here, both regulators and industry representatives agreed there are concerns about how rating agencies have performed leading up to the financial crisis.

However,  Dierdre Manna, vice president of industry, regulatory and political affairs for the Property Casualty Insurers Association of America (PCI), questioned whether transferring rating responsibilities to regulators comports with the NAIC’s mission statement.

She also questioned whether it would be possible for the NAIC to fully separate regulatory and rating agency responsibilities.

Iowa Insurance Commissioner Susan Voss said the NAIC has discussed taking on some rating agency responsibilities, but she noted there has been no application filed.

Illinois Director of Insurance Michael McRaith noted there is collective discomfort with the role rating agencies have played during the financial crisis, and Commissioner Voss said she was dissatisfied with the rating agencies’ answers when questioned about that role.

She acknowledged Ms. Manna’s concerns and asked if there was a way the NAIC could help the industry with its frustration regarding the rating agencies. Industry representatives and regulators agreed to continue discussing the matter.

The trade organizations also called on regulators to avoid the “siren song” of over-regulation due to complaints by consumer groups

Both Dave Snyder, of the American Insurance Association, and Neil Alldredge, of the National Association of Mutual Insurance Companies, said real consumer protections come with having a vibrant insurance market with healthy competition.

This competition is stifled, Mr. Alldredge said, when regulators respond to anecdotal evidence on issues with perceived controversy. He also said companies bear the brunt of the increased costs of over-regulation.

Efficient state regulation will stave off involvement from the federal government, Mr. Alldredge said, but he noted that regulators often lose focus on the real issues, such as producer licensing, because the industry is often put on the defensive by peripheral issues.

Mr. Snyder said regulators should focus on solvency protection and enforcing contractual obligations. He said regulators and insurers should be partners in reducing risk.

Commissioner McRaith said regulators try to understand insurers’ concerns on issues, but said the industry and the NAIC may not always agree on what constitutes true consumer protection.

Illustrating this point, industry representatives and regulators offered differing views on the issue of credit scoring. Mr. Snyder pointed to generally decreasing insurance rates and a relatively low number of consumer complaints stemming from insurers’ use of credit information when setting rates.

Regulators, on the other hand, questioned whether credit scoring is a surrogate for real underwriting, and noted concerns among legislators and consumers with the practice.

Ms. Manna of PCI also asked the NAIC to pursue a zero-growth budget this year due to the financial struggles of insurers, and called for more transparency regarding why some NAIC meeting sessions are closed to the industry and the public.

Ms. Voss said the NAIC would take both issues into consideration.

Blain Rethmeier, AIA spokesman, said he thought the session was “very productive.” He said he thought industry members effectively laid out where the insurers and regulators should find common ground regarding consumer protections.

In a statement, Ms. Manna said PCI appreciated that the NAIC will examine how it handles closed meetings. “Particularly in this age of greater openness and transparency, it is important that the NAIC follows a process that ensures closed meetings are conducted only when necessary and that proper notice and explanation is provided,” she said.

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