Robert Hunter and Jay Angoff of the National Insurance Consumers Organization recently charged {op-ed, June 24} that insurers are allowed to fix prices under their limited federal antitrust exemption. If it is illegal for two candy stores to agree to sell a candy bar at the same price, their argument goes, the same law should apply to insurers.

Their analogy is so specious that it is laughable. If, in fact, candy stores competed like insurance companies, there would be three stores at every intersection offering the widest variety of confections at the most competitive prices.

While we could respond to each point made by Hunter, the fundamental question to be answered is whether the insurance industry is competitive under the current regulatory framework. By all objective measures, the industry is one of the most competitive in the nation. And it is serving the public well.

The insurance industry's limited exemption from federal antitrust laws -- embodied in the 1945 McCarran-Ferguson Act -- actually fosters competition by allowing states to choose for themselves the type of regulation that best responds to local needs. While Hunter claims that a repeal of McCarran would not affect a state's authority to regulate insurance, his real goal is to substitute federal regulation of insurance for state regulation. This move is being led in Congress by Sen. Howard Metzenbaum. His bill effectively destroys state regulation of insurance. Though Metzenbaum and Hunter continue to obscure their true agenda, another key member of their coalition, Public Citizen's Joan Claybrook, has candidly acknowledged that federal regulation of insurance could follow after repeal of McCarran.

Their basic claim is that repeal of the exemption would increase competition. In fact, the opposite would occur. Less insurance would be available to the public. This may seem implausible, since existence of strong antitrust enforcement generally increases competition. But the exemption, though widely misunderstood, applies only when a state chooses to regulate insurance. If a state should decide not to regulate the insurance industry, the full force of the federal antitrust laws applies. Further, the real antitrust issues -- boycott, coercion and intimidation -- are not permitted by McCarran. For Hunter to suggest anything to the contrary is disingenuous.

In short, McCarran serves to foster competition in the insurance marketplace. This competition allows nearly 3,500 property-casualty insurance companies to operate under state regulatory authority. No company dominates a market in which market shares are measured in tenths of percentage points.

Both the Justice Department and Federal Trade Commission have concluded that the insurance industry is one of the most competitive in the nation. And both have rejected allegations that recent increases in some liability premiums were attributable to anti-competitive practices.

The realities of Hunter's campaign are being realized in many arenas -- you don't have to take the industry's word for it. Recently, Gov. Bill Clinton of Arkansas, chairman of the National Governors Association, said he saw no prospect of the association recommending a repeal of the exemption. "The governors want to retain a strong state regulatory apparatus," he explained. In addition, both chambers of the New York legislature have unanimously passed resolutions urging Congress to resist repeal of the exemption.

Instead of distorting the truth and spreading their own brand of fiction, Hunter and his disciple should put their energies into helping to improve the current regulatory system. Insurance products are important to Americas. Too important, we believe, to play fast and loose with a regulatory system that has served the public well. It may not be perfect. But crippling or killing the system would only serve to cripple the insurance marketplace, and ultimately, the insurance consumer -- the very consumer that Hunter purports to represent.

-- Robert E. Vagley The writer is president of the American Insurance Association and co-chairman of the Coalition for State Regulation of Insurance.