Gillespie Vows to Disallow Some Insurance Firm Costs

Insurance Commissioner Roxani Gillespie said Monday she will try to prevent insurance companies’ costs for political contributions, bad-faith judgments, institutional advertising, fines and penalties from being passed on to consumers in higher rates.

Gillespie added that she will also place caps on what companies can charge customers for what she deems in rate hearings to be “excessive executive compensation.”

In short, Gillespie vowed that, in calculating what rates should be, she will try to disallow the expenses she listed. That policy would follow suggestions made to her in recent months by a number of consumer groups seeking to hold down rates.

Gillespie’s latest expressions of intent also include a suggestion that she “press” in ongoing hearings for the 11.2% “fair rate of return” standard for companies that she originally advanced last summer but later wavered on.

“The (Insurance) Department has developed a record in the proceedings which supports its original figure,” she stated.

Such a rate of return, lower than most companies contend they should get, could eventually mean lower rates and more customer rebates under Proposition 103-mandated rollbacks. However, as in many past instances, following through on her pronouncements will almost certainly lead to industry lawsuits seeking to invalidate them.

Gillespie also responded to what she termed “unfounded, inaccurate and truly tasteless” charges last week from Harvey Rosenfield, chairman of the Voter Revolt organization that sponsored Proposition 103, that she is intentionally aborting enforcement of the measure in a kind of conspiracy with the industry.

“Rosenfield’s accusations are absolutely and demonstrably false,” Gillespie said. “Harvey and his Proposition 103 proponents are busier than sandbox cats trying to cover up a flawed law based on empty promises.”

Instead of Proposition 103’s promised rate rollbacks, Gillespie said, she believes that “millions of Californians will actually see rate increases as a result of the proposition’s passage.” She did not elaborate.

Rosenfield responded by reiterating his charge that many of Gillespie’s statements of intent are deliberate attempts to “make it look like she’s enforcing 103, when, in fact, she’s crippling it.” He accused her of incorporating legal defects in her actions that allow the companies to successfully sue her.