Superman? Quixote? Tilting at Tough Ones : New commissioner boldly takes on insurance industry

State Insurance Commissioner John Garamendi is off to an energetic start in his new job. And whether the insurance industry likes it or not, his outspoken public statements accurately reflect the frustration many Californians feel about automobile insurance rates that keep rising despite the enactment in 1988 of Proposition 103, which was intended to bring them down.

That’s the way it’s supposed to be. It is why a key provision of Proposition 103 made the post of insurance commissioner elective rather than appointive--to put a politician in the job who would be responsive to the people’s will. And right now people are very annoyed--to put it mildly--about the rising cost of insurance, especially automobile coverage.

When Garamendi, a former state senator from the Stockton area, was sworn in as California’s newest constitutional officer Monday, it was watched almost as closely as the inauguration of Pete Wilson as governor. Garamendi did not disappoint.

“Proposition 103 will be fully implemented--and fast,” he said flatly in his inauguration speech. And he went on to add that the rate rollbacks required under the initiative, which were immediately challenged by the insurance industry in court and have yet to be paid, “are the law and they will be paid.”

Garamendi backed up his tough words within hours of taking office. He imposed a freeze on future insurance rate increases until the companies that request rate hikes complete any legal challenges they have against Proposition 103 and pay any rate rollbacks due their policyholders.

His second day in office Garamendi announced new regulations for determining precisely what rate increases state-regulated insurers are entitled to, and said public hearings on the proposals will begin next month.

Garamendi’s performance in Week One was a stark, and we must admit refreshing, contrast to his predecessor. Although intelligent and well-intentioned, Roxani Gillespie was never enthusiastic about Proposition 103, and probably spent as much time telling anyone who would listen what was wrong with the initiative, and why it couldn’t work, as she did trying to implement it.

Of course Gillespie was an insurance company executive before getting the state job. And if she dug in her heels against Proposition 103, her former colleagues in the industry tried to stop it with a veritable Great Wall of China. Insurance companies challenged the initiative immediately, taking it to the California Supreme Court, which ruled it legal but added a whole new element of complexity to the controversy. The justices decided that rate rollbacks and other changes the initiative required of the insurance industry could go into effect only if they did not deprive companies of a “fair rate of return.”

That short phrase became pivotal to arguments over implementing Proposition 103, and it bogged down Gillespie’s all-too-brief effort to implement the measure. She held detailed hearings to determine what a fair rate of return is for the literally hundreds of large and small companies licensed to sell insurance in California. She finally settled on a figure between 11.2% and 19% a year. Consumer groups blasted that range as too high, and the issue is still in dispute. Garamendi also said last week that he will review Gillespie’s process. That’s a reasonable step, and yet it could also lead Garamendi into the same legal and bureaucratic bog that trapped Gillespie.

But that’s just one of many political and legal hazards Garamendi will face in trying to lower insurance rates in California--much less even deliver the rate rollback checks people expected after Proposition 103 passed. He’s got lots of jousting to do before people can cheer him as the white knight who rescued Proposition 103. And if he fails, he’ll be just another Don Quixote who took on too many windmills all at once.