CALIFORNIA ELECTIONS / INSURANCE COMMISSIONER : ‘Pro-Consumer’ Candidates Urge Opposite Solutions : GOP’s Quackenbush would cut regulation to lure insurance firms to California. Democrat Torres favors a get-tough policy on insurance rates and coverage.

In the already intense campaign for state insurance commissioner, both major party candidates are presenting themselves as champions of the consumer, each promising that ample and inexpensive insurance--among the biggest household expenses for millions of families--will receive top priority.

But Republican Assemblyman Charles W. Quackenbush and Democratic state Sen. Art Torres enter the electoral ring from vastly different philosophical corners. The methods they would employ to assure low rates are diametrically opposed.

Quackenbush--the recipient of hundreds of thousands of dollars of insurance industry campaign contributions--would treat the companies with kindness. He favors dropping as much of the rate-making regulation prescribed by Proposition 103 as possible, and trusting free-market forces to assure Californians the protection they need at affordable prices.

Torres--only a light recipient of industry contributions--by contrast believes in tight regulation, getting tough with companies when necessary, as a sounder way to guarantee that insurers perform in the public interest.

Quackenbush contends, however, that toughness as practiced by the current commissioner, John Garamendi, has been counterproductive, causing many insurers to leave California or reduce sales here.

Only a few have actually left the state, but many of the 700 or so property and casualty insurers operating in California have restricted sales of certain kinds of coverage.

“Art Torres wants to socialize insurance, and I want to keep it a private venture,” Quackenbush said in an interview. “With less regulation, the companies would be free to set their own prices, more would enter the state, and eventually the prices would come down.”

Torres and his supporters respond that history shows that does not happen. They point out that in the years before the passage in 1988 of Proposition 103, in a free-market setting, California was one of the states where rates were rising the fastest.

In the three years after rate regulation was introduced in 1989, California became one of only three states where auto insurance liability premiums actually went down. That was partly due to rate freezes ordered by Garamendi while the courts considered a flood of lawsuits over Proposition 103 and partly due to agreement by some companies to give the premium rebates called for in the measure.

Figures compiled by the National Assn. of Insurance Commissioners for 1989-92 show that while average liability premiums went up by at least 32% in the 10 most inflationary states, they went down by 0.2% in California in the same period.

The issue of how far regulation should go has become prominent in the Torres-Quackenbush fight in the areas of casualty homeowner insurance, particularly earthquake coverage. Many insurers have sought to reduce their exposure to losses by terminating the sale of earthquake insurance, raising deductibles and, in some cases, refusing to renew homeowners policies.

Torres has reacted with a far more active approach than Quackenbush. The Democratic candidate has called on Gov. Pete Wilson to order a moratorium on most non-renewals in homeowners policies, which would force insurers to stay in the state and continue covering their California customers. Torres also has co-sponsored legislation to give the insurance commissioner power to declare such a moratorium, and he supports legislation in Congress to create a federally backed national disaster insurance pool.

Quackenbush supports only the national insurance pool. He has opposed the moratorium and has said he supports “at least a temporary suspension” of the state law mandating that all sellers of homeowners policies also offer earthquake insurance. In short, he wants less regulation.

The result presents an apparent contradiction for Quackenbush, considering his belief that the less regulation there is, the more insurance companies will want to remain in California. In this case, withholding regulation would free insurers to pull out of the state at will.

But Torres adopts positions that raise problems, too.

Some of the senator’s past stands, and three bills he has on the governor’s desk now, indicate that Torres believes in loading up new coverages and obligations on the companies without allowing a rise in premium prices to defray the additional costs.

For instance, one Torres bill would extend health coverage for hundreds of thousands of Californians who have fertility problems, and another would allow the scientific and medical communities, rather than insurance companies, to decide which expensive new medical treatments are necessary. Quackenbush, like most Republicans, voted against both bills.

Quackenbush also voted against Torres’ so-called Homeowners Bill of Rights, also on the governor’s desk. Among its provisions is the requirement that the companies go to court to justify questioning policyholders under oath to probe suspected fraudulent claims.

Quackenbush calls that proposal “a trial lawyer’s bill” that would increase litigation, delay resolution of claims and amount to an impediment to the insurers’ anti-fraud efforts.

Torres denied that his measure is a trial lawyer’s bill, saying it protects policyholders against harassment by the companies.

The Democratic candidate accused Quackenbush of hypocrisy in opposing such measures. “When he goes out on the road, he says he’s for consumers in the free marketplace,” Torres said. “Yet when he’s given an opportunity to vote against insurers, he votes for them.”

Regardless of the disputes, all three of Torres’ bills, if signed by the governor, could lead to higher payouts by the companies and ultimately increase the pressure for higher rates in the fields of property and casualty insurance, the areas under insurance commissioner jurisdiction. Health insurance does not come under the purview of the commissioner’s office.

For auto insurance, Torres has been a major supporter of a “pay-at-the-pump” proposal in which motorists would buy coverage with their gasoline. Some critics believe that untried approach could add a big everyday insurance cost for many, while still requiring most people to buy supplementary coverage for full protection.

Like the Clinton Administration’s original health insurance proposals, pay-at-the-pump fell by the wayside as fears rose that it could prove more costly than the system it sought to replace.

Torres also faces the problem of keeping the courts on his side. Commissioner Garamendi has succeeded in winning several court battles over disputed regulations. Perhaps the best example was the recent unanimous state Supreme Court decision upholding Garamendi’s prescriptions for Proposition 103 rebates and future rate approvals.

But Torres, if he proves to be more of an industry foe than Garamendi, could inspire a new round of court tests.

Some industry observers believe that regulation might be weak under Quackenbush, but under Torres it might be so tough, particularly as pressure for a resumption of rate increases intensifies, that court backing could be lost, undermining the commissioner’s authority to hold insurance insurance costs for the consumer in check.