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May 10, 2006

Insurance Election Scandal Brewing In California

-- by Dave Johnson

I have been hearing about a scandal brewing over insurance regulation in California. Insurance Commissioner John Garamendi, who is now a candidate for Lt. Governor has called in the California Attorney General and the FBI to investigate a blackmail and extortion charge. See Garamendi says insurers trying to coerce him on auto regulations; asks FBI, state to investigate

State Insurance Commissioner John Garamendi accused automobile insurers of "coercion, extortion and blackmail" for launching a $2.4 million campaign attacking his proposed regulations that would cut the cost of some drivers' coverage in crowded urban areas. He asked the FBI, the U.S. Attorney and state Attorney General Bill Lockyer to investigate his allegations.

Garamendi, a Democratic candidate for lieutenant governor in the June 6 primary, said he was told that if he backed off pushing the regulation, he would be spared an attack by insurers as Election Day neared.

This one has a video clip: Auto Insurers Accused Of Blackmailing Commissioner
The state insurance commissioner says he’s facing threats of blackmail to keep auto insurance rates higher.

John Garamendi came out blasting Monday, accusing California's largest auto insurers of using political extortion to get him to delay implementing laws that would save California motorists money.


Background and details:

I received this e-mail today:

Insurance industry blackmail!

By 1998 California voters were fed up with abuses by the insurance industry. These included such things as high prices and arbitrary cancellations. One particularly onerous abuse was "territorial rating," the practice of setting your auto insurance rates based on where you live, rather than your driving record. In that year California voted to end such abuses by passing Proposition 103, which read in part:

1861.02 (a) Rates and premiums for an automobile insurance policy, as described in subdivision (a) of Section 660, shall be determined by application of the following factors in decreasing order of importance:
(1) The insured's driving safety record.
(2) The number of miles he or she drives annually.
(3) The number of years of driving experience the insured has had.
(4) Such other factors as the commissioner may adopt by regulation that have a substantial relationship to the risk of loss. The regulations shall set forth the respective weight to be given each factor in determining automobile rates and premiums. Notwithstanding any other provision of law, the use of any criterion without such approval shall constitute unfair discrimination.

Unfortunately, a California Court of Appeals in 2000 ruling made these provisions unenforceable. However, Proposition 103 also made Insurance Commissioner an elective office, an office now held by John Garamendi. Mr. Garamendi has promulgated regulations that banned territorial ratings, very much consistent with the wishes of California voters and much to the chagrin of the insurance industry.

A group of insurance companies -- Allstate, Farmers, Safeco, 21st Century, and State Farm -- is attempting to blackmail John Garamendi, who is now a candidate for Lt. Governor of California. These companies have raised $2.4 million to run a TV ad campaign against Mr. Garamendi asking viewers to "tell Insurance Commissioner John Garamendi to drop this unfair plan now." An industry representative contacted him through an intermediary and offered to drop the ad campaign if Mr. Garamendi would withdraw those regulations.

The insurance companies claim that they were merely informing Mr. Garamendi of their campaign out of "courtesy." Right.

John Garamendi refuses to be intimidated. He will enforce those regulations. He has filed formal requests for investigations of this group by the FBI, the U.S. Attorney's Office, and the state Attorney General. He will continue to work for the rights of California consumers as Insurance Commissioner and as Lt. Governor.


There is information at Consumer Watchdog,
Insurers to Spend Millions Against Garamendi for Lowering Premiums
Auto insurance companies are planning a $2.4 million campaign to attack California Insurance Commissioner Garamendi because he has proposed rules to lower premiums for California good drivers.
And a press release
Group Calls on Commissioner Candidates To Stand Behind Garamendi Insurance Regulations To Protect Integrity of Office
Voters' Trust Is At Stake After Attempt to Extort Garamendi

SANTA MONICA, CA -- The two principal candidates for Insurance Commissioner should immediately assure voters that they support the "good driver" regulations that the insurance industry apparently believes the candidates will revoke if elected, supporters of Proposition 103 said today in a letter to the presumptive Republican and Democratic nominees.

The letter from the non-profit, non-partisan Foundation for Taxpayer and Consumer Rights (FTCR) and Proposition 103 author Harvey Rosenfield comes two days after Insurance Commissioner Garamendi disclosed that insurers had tried to blackmail him in an attempt to delay the implementation of a key Proposition 103 reform until a new commissioner is elected. Last December, Commissioner Garamendi proposed rules to comply with Proposition 103's requirement that auto insurance premiums be based primarily on a motorist¿s driving record rather than their ZIP Code.

Commissioner Garamendi revealed Monday that a political operative had relayed a message from insurers to back off from regulations that would emphasize a drivers' safety record rather than ZIP code in pricing auto insurance, or face a $2.4 million negative ad campaign against him. The ads, reportedly launched this week after Garamendi¿s refusal to comply with the demand, are widely seen as an attempt to undermine his campaign for the post of lieutenant governor. [emphasis added]

Go there to read the rest.

Take a look at the PR firm in Sacramento spinning the attack.....Bicker, Castillo & Fairbanks

Posted by Dave Johnson at May 10, 2006 4:01 PM

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