WASHINGTON BUREAU — The Treasury Department wants to create a Consumer Financial Protection Agency that would oversee “financial advisors” but would have only limited authority over insurance activities.

The CFPA would oversee insurance activities “usual in connection with extending credit or servicing loans,” such as the sale and servicing of credit insurance, mortgage insurance and title insurance, Treasury officials said today.

In other cases, the bill creating the CFPA would exclude “the business of insurance” from the definition of CFPA-regulated “financial activity.”

The agency’s mandate would be to “promote transparency, simplicity, fairness, accountability, and access in the market for consumer financial products and services.” The CFPA board would have 5 members, with 4 public members nominated by the president and confirmed by the Senate.

The Treasury Department submitted the proposed CFPA bill, the Consumer Financial Protection Agency Act of 2009, to Congress this morning.

Obama administration officials had suggested in earlier op-eds and comments that the CFPA might regulate annuities.

Although the bill text specifically excludes the “business of insurance” — other than credit, mortgage and title insurance – from the definition of CFPA-regulated financial activities, officials at the Association for Advanced Life Underwriting, Falls Church, Va., say they have questions about the implications of provisions concerning regulation of financial advisors.

Unlike the definition of “investment advisors,” the proposed bill does not appear to contain a carve-out for advisors regulated by the Securities and Exchange Commission, according to Sarah Spear, AALU director of policy and public affairs.

Spear says the AALU’s analysis is based on a “cursory review” of the proposed bill.

The American Council of Life Insurers, Washington, is “still examining the language,” according to ACLI spokesman Steve Brostoff.

The ACLI fully agrees with Treasury that consumers deserve strong protection, and it believes that “annuities represent a poor fit for the proposed CFPA,” Brostoff says.

The National Association of Insurance and Financial Advisors, Falls Church, welcomes the Obama administration decision to exclude most insurance activities and activities regulated by the SEC from the CFPA bill.

“We maintain that any attempt to separate consumer protection regulation from solvency regulation could result in harming, rather than protecting, the consumer,” NAIFA spokesman Lee Allen says. “The simple truth is that in the insurance business, insurer solvency is the ultimate consumer protection, so the insurer can pay when claims come due.”

A copy of the proposed bill is available here.