2006.12.07: December 7, 2006: Headlines: Figures: COS - Ethiopia: State Government: Politics: Capitol Weekly: Critics accuse Garamendi of "jamming" his succesor as California State Insurance Commissioner

Peace Corps Online: Directory: Ethiopia: Special Report: California State Insurance Commissioner John Garamendi: April 4, 2005: Index: PCOL Exclusive: RPCV John Garamendi (Ethiopia) : 2006.12.07: December 7, 2006: Headlines: Figures: COS - Ethiopia: State Government: Politics: Capitol Weekly: Critics accuse Garamendi of "jamming" his succesor as California State Insurance Commissioner

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Critics accuse Garamendi of "jamming" his succesor as California State Insurance Commissioner

Critics accuse Garamendi of jamming his succesor as California State Insurance Commissioner

A barrage of regulations deeply affecting California's multibillion-dollar insurance industry are poised to go into effect within the next few weeks--just before newly elected Insurance Commissioner Steve Poizner is sworn into office. Angry insurers believe the eleventh-hour rulemaking reflects an attempt by departing Insurance Commissioner John Garamendi, a Democrat, to jam the newly elected Republican commissioner, Poizner, and force a fait accompli on the Republican Poizner, who is already seen as a likely gubernatorial contender in four years. If the new commissioner seeks to throw out the new rules, some insurers believe he will be attacked as anti-consumer in the run-up to the 2010 elections--a scenario that could help Democratic contenders, such as Garamendi, who may seek to succeed incumbent Gov. Arnold Schwarzenegger. California Lt. Governer John Garamendi served as a Peace Corps Volunteer in Ethiopia in the 1960's.

Critics accuse Garamendi of "jamming" his succesor as California State Insurance Commissioner

New insurance commissioner faces hot-button regulations

By John Howard

(published December 7th, 2006)

A barrage of regulations deeply affecting California's multibillion-dollar insurance industry are poised to go into effect within the next few weeks--just before newly elected Insurance Commissioner Steve Poizner is sworn into office.

Angry insurers believe the eleventh-hour rulemaking reflects an attempt by departing Insurance Commissioner John Garamendi, a Democrat, to jam the newly elected Republican commissioner, Poizner, and force a fait accompli on the Republican Poizner, who is already seen as a likely gubernatorial contender in four years. If the new commissioner seeks to throw out the new rules, some insurers believe he will be attacked as anti-consumer in the run-up to the 2010 elections--a scenario that could help Democratic contenders, such as Garamendi, who may seek to succeed incumbent Gov. Arnold Schwarzenegger.

Garamendi's supporters flatly reject notions that politics played a role in crafting the regulations, which they characterize as strongly pro-consumer and having taken months, or longer, to develop. They believe companies are complaining about the regulations in order to stall the new rules. "I love this, the insurance industry is crazy. For me to have some kind of Machiavellian thing here is ridiculous. Why would I endorse somebody who could then turnaround and make me look foolish? It doesn't make sense," said Harvey Rosenfield of the Foundation for Taxpayer and Consumer Rights

But insurers, long critical of the commissioner, are suspicious, noting that the core of the sweeping regulations all have been finalized since November 1.

"This is the critical mass of industry-defining regulations that have been under development for 18 years and now we are confronted with them in the space of one month," said Bill Sirola, a Sacramento-based spokesman for State Farm. "They impose a whole new universe of restrictions and requirements on the industry. They came out of nowhere for no reason and are just about to become the law of the land," he said.

Others agreed.

"The fact is, the new administration will be called upon to implement and enforce a great number of new regulations on which the incoming administration had no input," said Sam Sorich of the Association of California Insurance Companies. "I don't recall a situation of this magnitude, of this many sets of regulations that go into effect in a matter of days, literally before the new administration takes office."

Most of the regulations--assuming their likely approval by the Office of Administrative Law--will go into effect between December 22 and January 5. Poizner will be sworn in on January 8. The OAL reviews regulations to make sure they are constitutionally proper and decides whether they satisfy several benchmarks--such as the authority of the agency that wrote them, the necessity for the rules, clarity, consistency, legal referencing, correctness and duplication. The OAL rarely rejects regulations.

The 14 regulations were crafted during the administration of exiting insurance commissioner Garamendi, the newly elected lieutenant governor and potential 2010 gubernatorial contender. They include new rules to limit insurance companies' profits, broaden the payment of advocacy fees to consumer groups, expand the mediation system for disputed claims, set up rules for companies' surveys of auto-body-repair shop rates, change the way that auto insurers verify mileage, plus numerous other issues. Several regulations deal with health, workers' compensation insurance or disability issues, but most focus on property-related coverage. Three of the regulations--involving intervener fees, rate of return and the auto-body-repair shops--already face court fights from insurers.

All were put together this summer or fall, although preparation for the proposals began earlier. They were the subject of public hearings, including a 45-day period for public notice and review, plus a 15-day review period for changes resulting from the public hearings. The regulations are written by the insurance commissioner, but need procedural approval from the OAL before they can take effect. Once the OAL approves them, they are submitted to the secretary of state's office for final review before taking effect. Many of these regulations, however, are drafted to take effect immediately upon OAL approval, which means they would be law before Poizner takes office.

"It doesn't make sense to call this jamming, because Commissioner Poizner said he would implement at least some of these," said Doug Heller, Rosenfield's colleague and executive director of the Foundation for Taxpayer and Consumer Rights. "The insurance industry loves to think there is a conspiracy, otherwise they would have to explain away their failings to their own customers. It's not Harvey or me or anybody who is going to scream when an insurance commissioner makes a mistake. That's going to happen no matter what, and everybody knows that. Poizner doesn't owe anything to Harvey or insurance companies; he only has to answer to the voters."

Poizner, as the new commissioner, could rescind the rules, but that action would entail a new round of hearings and review and could take weeks or months--unless he takes emergency action. That action, however, could draw political fire from consumer advocates, such as Rosenfield, who, in a surprise move, backed Poizner over Democratic rival Cruz Bustamante during the election campaign.

For Garamendi's part, the notion of raising questions about the new regulations is an effort to discredit the rules.

"This is simply a stall tactic by the insurance industry. They don't like these pro-consumer regulations, and we see this as a last-ditch effort to try and derail the system," said Garamendi spokesman Byron Tucker.

"What's really impressive here is the number of pro-consumer regulations that [Garamendi] has been able to push through. These were extremely complex, difficult pieces to push through and we are extremely proud to get them done. More importantly, we didn't want to leave Commissioner Poizner with a backlog of regulations, such as Commissioner Garamendi inherited." Tucker added that when Garamendi himself took office, he "had a backlog of 30 very complex regulations dating back to previous administrations."

In direct pocketbook terms, California's insurance commissioner, an independent constitutional officer, is arguably the most powerful regulator in state government. The commissioner, who runs a department of 1,300 employees and a $200 million budget financed by fees on insurers, has the authority to set rates, seize financially unstable companies, audit insurers and bar companies from doing business in the state.

The commissioner regulates a $115 billion insurance market--the largest of any state in the nation--and his duties include regulating some 340,000 brokers and agents, and enforcement of the voter-approved Proposition 103 of 1988, a pro-consumer initiative that set strict rules for insurers' conduct.

Contact John Howard at john.howard@capitolweekly.net



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Headlines: December, 2006; RPCV John Garamendi (Ethiopia); Figures; Peace Corps Ethiopia; Directory of Ethiopia RPCVs; Messages and Announcements for Ethiopia RPCVs; State Government; Politics; California





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