Why the Big Rush to OK Quake Premiums?

State Insurance Commissioner Chuck Quackenbush is trying to pull a fast one again at the expense of consumers. First, he tried to ram through legislation early this year to create the California Earthquake Authority, although the benefits to homeowners were suspect. Sacramento finally approved the new state agency in September, and now the commissioner is attempting to implement a nonsensical set of earthquake premiums without a required legal review. Quackenbush should hold a public hearing to examine the rates before any change takes effect.

Why is he rushing? Because Quackenbush is trying to meet a self-imposed deadline of Dec. 1 to get the CEA up and running. If the commissioner succeeds in implementing the earthquake rates on an interim basis, Palmdale, for example, which is astride the San Andreas fault, would pay much lower rates than most of Los Angeles.

The proposal for premiums is illogical and unfair. It isn’t based on risk; it’s based on ZIP codes, which have no apparent relation to earthquake danger.

Sacramento created the CEA because homeowners were having a hard time insuring their homes. Insurers were refusing to write new policies so they would not have to offer earthquake coverage too. Their goal was to reduce their earthquake liability after having paid $8.4 billion to cover residential damage resulting from the 1994 Northridge earthquake. Now the CEA, instead of private insurers, will provide earthquake coverage.

Problem is, the elected commissioner’s mandate is to look out for the insurance interests of consumers. His job is regulatory oversight. But while he’s supposed to be a watchdog over the CEA, Quackenbush also sits on the governing board of the CEA. The governing board of the CEA is composed of the governor, insurance commissioner, treasurer, Assembly speaker and Senate president or their representatives. Only three--the governor, commissioner and treasurer--have voting rights.

Quackenbush oversees CEA operations and named two officials to head up the authority. Gov. Pete Wilson wanted a nationwide search for a chief executive officer, but the two other board members voted to give the job on an interim basis to Greg Butler, Quackenbush’s 31-year-old political aide. Wilson also wanted the premiums to be vetted in the required public process. But the other two voting members allowed Quackenbush to proceed with emergency regulations that include the rates--rates so controversial they almost doomed passage of the CEA in the Legislature. As eventually passed, the legislation calls for the rates to be subject to review. As a result Consumers Union has filed a court challenge to Quackenbush’s plan. CEA premiums should be subject to the same review process as all other insurance rates.

The CEA is Quackenbush and company, a subsidiary of the commissioner’s office. How then can he provide objective oversight? This is a major issue that the governing board must clarify. Otherwise the CEA’s credibility is seriously compromised, and so is Quackenbush’s.