State Insurance Chief Plans to Beef Up Agency

State Insurance Commissioner Roxani Gillespie said Monday that she plans to add 300 employees to the 515-member staff of the Insurance Department and increase the department’s annual budget of $33 million by $18 million to enforce Proposition 103 if the state Supreme Court lifts its stay, allowing her to do so.

The initiative empowers the department to charge enforcement costs to the insurers.

In a 90-minute interview at her offices here, Gillespie vowed to administer Proposition 103, if she gets the chance, with neutrality and diligence.

“We have no feeling about the law; we just implement it,” she said. “We are ready (in this case).”

She said an 11-member “implementation committee” working since September has agreed on establishment of numerous separate hearing panels. The panels would take evidence on expected pleas by insurance companies to be allowed to raise their rates above the 20% rollback from 1987 levels mandated under Proposition 103.

Gillespie said the hearings would focus on establishing precisely how much income each company is receiving and how it is spent--on claims payments, loss adjustment expenses, commissions, overhead, taxes and fees. She said this should be done in a clear, open way so the public can fully understand rate decisions.

‘Very Conversant’

“We feel we are very conversant on the finances of most of the companies already,” Gillespie said. “But we are putting together a process that will make those finances clear to the world. . . . We particularly want to show where the money is going--how much to litigation, how much to the doctors, how much to the lawyers, how much to pay wages. Where the premium dollar is disappearing.”

At the same time, the insurance commissioner said that since she has no way of knowing how many consumer or other groups may wish to intervene in the hearings, or how many appeals there may be, she cannot say how long the process may last.

She pointed out that according to the initiative’s terms, she has no power to “exempt” any companies from the rate rollbacks if the Supreme Court allows them to go into effect. Rather, the companies are given the right to come to her department after making the rollbacks and ask for increases immediately, if they are threatened with insolvency.

On the assumption that many companies will do this, Gillespie said she would call hearings on rather short notice, “certainly less than the maximum 45 days.”

“We will act promptly and follow a format,” she said.

Gillespie also cautioned that a whole group of issues may arise over enforcement of other provisions of the initiative, which, she remarked, is often rather spare in providing details as to how enforcement is to be undertaken.

For instance, she said, the measure allows banks into the insurance business, but it is silent on who is to regulate them when they get there.

Gillespie said she believes that such activities by the banks ought to be regulated by the Insurance Department, but the department’s initial discussions with banking interests have already shown the banks feel differently.

Enforcement Details

Stating that the matter, as well as some other enforcement details, will probably have to be resolved by the Legislature, Gillespie said with a smile: “This is what makes this exciting. . . . This will be fun.”

But, the commissioner added, to the extent that she has authority to set enforcement policy, she will not hesitate to do so.

Gillespie said she particularly believes that safeguards must be established early to make sure that newly allowed group insurance policies for auto coverage are not subject to “a series of scams, if people come in and try to circumvent state surplus requirements” meant to provide guarantees against a company having inadequate funds to pay claims.

A department attorney who sat in on the interview with Gillespie, Reid McLaran, noted that certain other details of the initiative--including sections that repeal various state statutes--strike the department as important.

For instance, McLaran said, it has long been known that the initiative calls for repeal of the anti-rebate clauses in current law, under which insurance agents were barred from rebating part of their commissions to their customers in an attempt to obtain their business.

But what has not generally been understood is that the provision being repealed affects life insurance agents, as well as automobile, homeowner and commercial agents in the so-called property-casualty part of the business.

Gillespie noted that life insurance agent commissions are often higher than those of property-casualty agents, allowing a greater scope for rebates in life insurance than in auto insurance. The effects could be far reaching, she speculated, but so far they have scarcely been explored.

Repeatedly, in the interview, the insurance commissioner expressed her determination to be nonpolitical if she does get the chance to administer Proposition 103. She said the politics will be left to others, and she reiterated that she has no intention to run for the post of insurance commissioner, which, according to Proposition 103, will become an elective office in 1990.

Of the $18 million in new spending she plans for her department to enforce Proposition 103, $11 million will be spent on salaries and benefits, Gillespie said, and most of the 300 new people hired will be professional rate setters, rate analysts, lawyers and financial analysts.

Gillespie said another $5 million will go for operating expenses and equipment and $2 million for major equipment, computers designed to allow the department to cope with the flood of financial information expected to be provided by companies seeking rate increases.