Consumer Advocates Call On Office of Administrative Law To Resist
Politics, Protect Public
SANTA MONICA, Calif., May 13 /PRNewswire-USNewswire/ -- The
Schwarzenegger administration should reject the "emergency" changes to the
Proposition 103 Rate Regulations filed by Insurance Commissioner Steve
Poizner last week after virtually no public scrutiny, consumer advocates
said in a letter to the state Office of Administrative Law (OAL) sent
Monday.
There is no "immediate threat to the public health or safety" and
therefore the Poizner changes, which will lead to rate increases for auto,
homeowner and earthquake insurance, should not go into effect until they
are subject to open review and public hearings as required by Proposition
103, the non-profit Consumer Watchdog organization said. OAL is responsible
for reviewing regulations to ensure they comply with state law.
Read Consumer Watchdog's letter:
http://www.consumerwatchdog.org/resources/Comments-OAL_5_12_08.pdf
"Commissioner Poizner declared an emergency in order to avoid scrutiny
of the giveaway to insurance companies that is contained in these
regulations," said Harvey Rosenfield, author of Proposition 103. "Last we
checked, insurance companies wanting more money from consumers does not
qualify as an emergency."
The Proposition 103 Rate Regulations govern the rates that insurance
companies are allowed to charge policyholders. The changes proposed by
Commissioner Poizner reverse decisions made by Poizner's predecessor,
Commissioner John Garamendi, after two years of extensive analysis. In a
ten-page letter to Poizner last week urging him to withdraw the
regulations, Consumer Watchdog pointed out that key changes were adopted,
sometimes nearly verbatim, from proposals made by the industry to Poizner
(and rejected by his predecessor). Read the letter to Poizner:
http://www.consumerwatchdog.org/resources/EmergencyRegLtr.pdf
In its letter to OAL, Consumer Watchdog said Commissioner Poizner had
failed to offer any legitimate basis for derailing the usual process of
public scrutiny in favor of proposals largely developed behind closed doors
and taken, in some cases verbatim, from insurance industry proposals that
had been rejected by the previous commissioner. Poizner claims that his
changes are needed immediately so that they will apply to rate applications
that insurance companies must submit by July 14, 2008, to comply with rules
requiring auto insurance companies to base motorists' premiums on driving
safety record rather than zip code.
In a point-by-point analysis, Consumer Watchdog explained that in fact
there is no emergency:
1. Under state law, "emergency regulations" are only permitted in "a
situation that calls for immediate action to avoid serious harm to the
public peace, health, safety, or general welfare." There is no such threat.
2. More than 1,000 insurance rate filings have been conducted under the
current Prop 103 Rate Regulations in the past year, including a $250
million rate cut for Allstate customers, proving that the present
regulations are working properly and public welfare will not be compromised
if changes to those rules are not in place before July 14.
3. The July 14 deadline only applies to auto insurance rates, yet many
of Commissioner Poizner's proposed emergency changes do not even apply to
auto insurance, such as one rule that will allow earthquake and medical
malpractice insurers to increase the amount of reinsurance costs they can
pass through to policyholders.
4. The Department had nearly two years to conduct proper hearings on
changes prior to the July 14, 2008 deadline, which has been in place since
Commissioner Garamendi established it in the summer of 2006. In fact,
Commissioner Poizner held a "workshop" to discuss the regulations in April
2007, but did not announce most of the anti-consumer provisions that were
sent to OAL until April 2008, at which time the Commissioner held a single
half-day public workshop. Several of the most anti-consumer changes were
made after that workshop.
"Commissioner Poizner has failed to come close to demonstrating any
harm to the public that would justify the adoption of substantial
amendments to the Rate Regulations on an 'emergency' basis," Consumer
Watchdog wrote in its letter to OAL. "His two-page explanation of the
'emergency' is full of unsubstantiated and vague allusions to the
difficulty the industry and the California Department of Insurance (CDI)
will face if the proposed changes are not made right away. It also never
describes how the proposed regulations will actually address the alleged
'emergency.'"
OAL Must Resist Politics
Consumer Watchdog is calling on OAL to conduct its inquiry into whether
an "emergency" exists on an objective and non-partisan basis, and ignore
the politics and pressure from the insurance industry that led to the
proposed changes. The group noted that the proposed emergency regulations
were signed by the OAL's prior director Bill Gausewitz, himself a former
insurance lobbyist and now a lawyer at the Department of Insurance.
Consumer Watchdog also pointed to Governor Schwarzenegger's Cabinet
Secretary Dan Dunmoyer as a cause for consumer concern. Dunmoyer, who
serves as the Governor's liaison to state agencies, spent more than a
decade as the insurance industry's top lobbyist in California. His former
association, Personal Insurance Federation of California, lobbied
aggressively for the rule changes that were included in Commissioner
Poizner's emergency proposal. Consumer Watchdog said that deferring to
industry interest and rubberstamping these emergency regulations would be
an abdication of the OAL's duty to protect the public from overreaching
actions by state agencies.
"Californians need the officials at the OAL to provide protection from
an unnecessary and illegal declaration of emergency by the Insurance
Commissioner. Political considerations must be ignored and the agency will
have to demonstrate independent judgment if it is to have credibility as an
arbiter of the law," said Douglas Heller, Consumer Watchdog's Executive
Director.
If enacted, the emergency rule changes will immediately:
* Allow insurers to increase their rates in order to earn profits far
in excess of what is justified under Proposition 103.
* Permit insurers to game the regulatory system by inflating the
projected amount of payments of future claims they can pass through to
current policyholders.
* Allow insurers to buy unregulated "reinsurance" and then pass all
such expenses on to policyholders, while denying consumers the right to
challenge the cost of the reinsurance or any conflicts of interest or
kickbacks.
Consumer Watchdog, formerly The Foundation for Taxpayer and Consumer
Rights, is a nonpartisan, nonprofit organization.
SOURCE Consumer Watchdog
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Related links:
http://www.consumerwatchdog.org
CONTACT:
Doug Heller, +1-310-392-0522 ext. 309, or
Harvey Rosenfield, +1-310-392-0522 ext. 304, both of Consumer
Watchdog
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