WASHINGTON – Congress should set national standards for insurance companies to curb unsavory practices, provide better disclosure to customers, and control soaring prices, New York Attorney General Eliot Spitzer said yesterday.

In testimony to a Senate Governmental Affairs subcommittee, Mr. Spitzer and other state regulators didn’t recommend having federal regulation replace state oversight of insurance companies but called for a greater federal role in standard-setting.

Mr. Spitzer compared insurance industry conflicts and abuses to those he previously attacked at mutual fund companies and Wall Street investment banks, and said industry self-regulation has been “an abject failure.”

The New York attorney general announced a sweeping insurance industry probe in mid-October, which he said found “widespread evidence” that insurance brokers steered customers to insurance carriers who provided incentive payments, including so-called “contingent commissions.” He said customers are routinely misled about such payments, which he thinks are “essentially kickbacks.”

Abusive practices extend into reinsurance and nearly every line of the insurance business, including medical malpractice, property and casualty, marine and aviation and employee benefits, according to Spitzer. He said that means consumers are paying more for coverage, including health insurance, and may be steered to carriers that aren’t the best for them.

New York Insurance Superintendent Gregory Serio agreed, telling the Senate panel “it is not a small, compartmentalized problem at all.”

Lawmakers are taking a closer look at industry practices amid investigations by Mr. Spitzer into possible bid rigging and fraud at big-name insurance brokers, including Marsh & McLennan Cos., American International Group Inc., and Ace Ltd.

Retiring Senator Fitzgerald, a Republican of Illinois, who chairs the Senate panel that called the hearing, said he is convinced the federal government should play a greater role in insurance regulation. He wants Congress to revisit a long-standing exemption from federal antitrust laws for insurers, and questioned whether insurance brokers even qualify for such an exemption.

While insurance agents represent the carriers, brokers are supposed to represent customers. California Insurance Commissioner John Garmendi said ideally, brokers ought to make good recommendations after weighing different options and “keep their finger off the scale.”

Brokers such as Marsh, which offer one-stop shopping for insurance, financial management, and benefits consulting, have a big chunk of the commercial-insurance market, but Mr. Garamendi said abusive practices are likely to be found at smaller brokers offering products for retail customers, such as home and auto insurance.

Full disclosure of any commissions and other payment would help insurance customers detect potential conflicts, state regulators agreed. Mr. Spitzer said his office is continuing to probe potentially improper incentive payments to brokers, including vacation packages, personal loans, and grants of stock and stock options in insurance companies. He said he would welcome vigorous investigation by Congress, particularly into areas that state regulators cannot reach, such as offshore operations by reinsurers.

“Collusion, tying, bid-rigging, price-fixing are simply against the law,” said Connecticut Attorney General Richard Blumenthal, who also testified Tuesday. He said the remedy for such abuse is for state authorities to sue wrongdoers and for the federal government to provide stronger antitrust enforcement against insurance brokers and companies.

Insurance executives who testified to the panel after state regulators said any industry abuse is isolated, not rampant. They expressed shock and dismay at Mr. Spitzer’s allegations, but said such behavior is not the norm.

“You had a few arrogant players in the market who took advantage of the market and had the market power to do it,” said the president and chief executive of the Property Casualty Insurers Association of America, Ernst Csizar.

Insurance executive Albert Counselman, past chairman of the Council of Insurance Agents and Brokers, defended “contingent commissions,” saying they can reduce costs for customers when used properly.

Alex Soto, president of Insource Inc., an independent Miami insurance agency, who testified on behalf of the Independent Insurance Agents and Brokers of America, called for clear, written disclosure of brokers’ fees, including contingent commissions and placement service agreements before a customer buys insurance.