Lost Opportunity

The final report from the Assembly Insurance Committee on the state Department of Insurance scandal was anxiously awaited but a letdown when it arrived Monday. It said little more than we already knew: Ousted Commissioner Chuck Quackenbush had subverted the regulatory process, cheated Northridge earthquake victims and extracted money from insurers--all to further his political career. The committee, under Chairman Jack Scott (D-Altadena), deserves credit for holding hearings that led Quackenbush to resign. The report, however, is a disappointment for its lack of specific recommendations.

Scott said the Legislature can deter abuse by checking the “unfettered authority” of the post. But the proposed changes merely tinker with the law. In some cases, they just call for a review of current practices.

The committee, with its insight from five lengthy hearings, should have gone considerably further, though of course insurance companies wanted nothing done. Getting rid of Quackenbush did not necessarily solve the problem. Without structural reform, future commissioners might still be able to use the machinery of the department to serve their own purposes. The timing of the report was right--lawmakers are grappling with a variety of reforms in the frenzied final days of the 1999-2000 session--but substance is lacking.

The need for some legislation is obvious, including a bill currently before the Legislature that extends the statute of limitations on claims from the 1994 earthquake. This measure, by Senate President Pro Tem John Burton (D-San Francisco), keeps the door open to lawsuits by earthquake victims whose claims were improperly rejected by insurers; it should become law.

Lawmakers would have benefited from the committee’s guidance on a proposal to ban campaign contributions to insurance commissioner candidates by insurance companies or to limit them to $250. The idea sounds good, but such a restriction might have little effect as long as state law allows individuals, including insurance executives, to give unlimited amounts of money to candidates.

Much more needs to be done. The acting insurance commissioner told the committee that major decisions often were made arbitrarily because the department had no formal policies or guidelines. Some of these lapses can be fixed administratively, but basic flaws will require legislative attention. During the hearings, it was clear that a remarkable lack of accountability allowed massive wrongdoing to continue for months before one whistle-blower finally came forth. It should be the Legislature’s role to face down the insurers and their lobbyists with more than finger-wagging.