Outraged by rapidly rising premiums for auto insurance, California voters passed Proposition 103 in 1988 to turn the insurance commissioner's job into an elected office with the power to reject proposed changes in the rates for property and casualty insurance. Since then, the commissioner has been arguably the most important consumer protection official in the state, overseeing more than 600 insurers that collect $123 billion in premiums for health, auto, home and other policies. This year, voters will choose among three candidates offering sharply contrasting views on how best to provide that protection, and it's a debate worth having. Nevertheless, the best candidate for the job is the one who has it already, Democrat Dave Jones.
Under Proposition 103, the insurance commissioner is supposed to see to it that rates for property and casualty policies — but not health plans — are not "excessive, inadequate [or] unfairly discriminatory." But the commissioner's role is more than just to push back against premium increases, as much as that might appeal to voters. He or she must also make sure the companies selling coverage in the state are financially sound. There's a balance the commissioner has to strike, guarding against insurers inflating premiums unreasonably while still giving the companies room to profit. A commissioner who fails to scrutinize insurers' plans and practices would invite price-gouging and other abuses. But one who finds reasons to fight insurers at every turn could drive them out of California, leaving consumers with fewer options.
When Jones first ran for the office in 2010, some critics contended that he would fall into the latter camp. After all, as a legislator he'd pushed hard to increase the state's authority to regulate insurers. He hasn't proved to be a single-minded foe of the industry, however. Instead, he's been an active but thoughtful regulator. Consumers saved an estimated $1.4 billion on premiums during his first three years, yet the number of companies selling property and casualty coverage has remained relatively constant, and their premium revenue has grown slowly but steadily. Jones has also taken steps to reduce insurers' losses on workers' compensation coverage and to reduce fraud, which can hurt consumers and insurers alike.
A policy wonk who steeps himself in details, Jones has found creative ways to use the powers of the office to help consumers. For example, he helped force life insurers to pay benefits owed to survivors who hadn't filed claims because they hadn't known the policies existed. And to guard against homeowners being sold insufficient coverage, he set rules for how insurers estimate the cost of rebuilding a house after a disaster.
Jones' Republican opponent, state Sen. Ted Gaines of Roseville, is an independent insurance agent, a position that he says makes him the "ultimate consumer advocate" within the industry. In Gaines' view, Jones has diminished competition and choice in the state by making it too hard for insurers to get approval for their offerings. If elected, Gaines promises to work to bring more insurers into the state and encourage more innovation in their policy offerings.
He is right to ask whether the state could do more to promote competition and innovation in property and casualty insurance. But at least some of the barriers and delays he objects to are a result of Proposition 103, not Jones. Voters demanded a heavier regulatory hand in Sacramento because they felt victimized by auto insurers despite the seemingly vigorous competition in that market. A more fundamental issue is that Gaines is skeptical of the value of regulating premiums, and has argued publicly that it's counterproductive. Unlike Jones, he strongly opposes a proposal to give the insurance commissioner the power to regulate health insurance premiums, which the department can only review and comment on today. He also opposes much of the 2010 federal healthcare law that is extending coverage to millions of Californians. Those positions are hardly surprising for a Republican, but they don't fit well with the job Gaines is seeking.