My wife is an urban land use planner. When I try to explain that to people, I usually say, “She plays Sim City for a living, only with real cities.” When that fails, I tell them that she’s the person who argues your case whenever you want to build or remodel a building and the local zoning officer says you can’t. That’s not entirely accurate, but it gets the point across.

In New Jersey, planning law is administered on the local level, and there are times when that local focus can make it hard to render a decision with a bigger picture in mind (like how a proposed shopping center or power station might be a bad idea locally, but a good idea regionally). Some argue that planning law should be administered on the state level, to enforce more consistent standards and interpret planning law in a broader context. But that would overlook the nuances that inform local planning decisions. The state would be a distant authority with no real investment in living by the decisions it hands down. And really, why give Trenton one more thing to screw up?

It is unclear if state planning rule will ever displace local rule. Were it to happen, there would surely be a big dust-up over it, and I have to imagine that for a lot of people, the results would not be worth the fuss, especially considering how uncertain it is that state rule actually would work better than local rule. But the thought of it lingers, like an itch you can’t scratch.

I mention this because I see state and federal insurance regulation going the same way. Earlier this year, we saw a strong effort to create meaningful federal insurance oversight. The National Association of Insurance Commissioners, representing the 55 different insurance regimes in the United States (all 50 states plus Puerto Rico, Guam, the Virgin Islands, American Samoa and the Northern Mariana Islands), fought this tooth and nail, and largely succeeded in rendering the Federal Insurance Office a regulatory also-ran. It was quite the victory for the status quo, but hardly one for the consumers the NAIC is supposedly trying to serve. After all, it’s the NAIC that champions the most inefficient insurance regulatory scheme in the world. And for a nonprofit group, it raises an awful lot of money, apparently so it can lobby Washington. Plenty of states are addicted to their premium tax income, as well as to the political stepping stone that is the insurance commissioner’s office. No wonder the NAIC is so resistant to change.

And for all of this, what does the NAIC really deliver? Insurers have to register programs in every state and territory, hardly the hallmark of an efficient marketplace. Legislators defer to the NAIC like it is a government agency, yet it lacks the accountability of one. And what about AIG? Sure, it was not an insurance failure, but any curious commissioner could have seen the writing on the wall, and the NAIC was perfectly positioned to raise the alarm on a company that posed a systemic risk to the global economy before it melted down–or to refer the matter to a federal agency that could. But it didn’t.

A powerful Federal Insurance Office might not do any better, but we won’t know, thanks to the NAIC. In the meantime, we have already seen the limits of the state-based model, which rang the opening bell on the worst financial catastrophe since the Great Depression. State insurance regulation had its golden age, and it ended on September 16, 2008. It’s time to try something else.