Final answer:
Federal regulation of insurance offers the advantage of consistent standards across states, preventing a race-to-the-bottom in regulations and ensuring programs with positive externalities are not underfunded.
Step-by-step explanation:
An advantage of federal regulation of insurance over state regulation is the potential for more uniform standards and regulations across different states. Federal regulation could address the issue of collective action, where state and local authorities may be reluctant to raise regulatory standards due to fears of being at a competitive disadvantage. With federal standards in place, such as minimum insurance coverage requirements, there can be a more consistent protection level for consumers across state lines, countering the race to the bottom that could occur with state-level regulation. Moreover, federal oversight could ensure that positive externalities, like environmental benefits from stringent state regulations, are not underfunded due to a lack of interstate coordination.