What does he plan to do?

First, Do No Harm!

As insurance commissioner, my first and foremost goal would be to "Do no harm." With the politicization of insurance regulation, we've had two corrupt individuals attempting to use the resources of the insurance department and the insurance industry (through extortion and intimidation) for personal enrichment and as a stepping stone to higher political office. Even though I disagree with his political leanings far more than his predecessor, Harry Low (who is not running for Insurance Commissioner), the current appointed Insurance Commissioner, has done a far better job than either elected commissioner. Most people don't even know who they voted for.

Most, if not all, economic regulation is harmful to the public and the economy; if anyone benefits at all, it usually is limited to the politicians who exercise the vast discretionary power over the industry. Sometimes, the regulated industry also benefits because it is shielded from customer accountability and competition by the reguators (like the phone company). Vast resources are wasted making the Insurance Commissioner happy that could better be used making customers happy.

Through my experience with insurance regulators throughout most of the fifty states, I have seen what works and what doesn't work; I have seen the harm done by both excessive zeal (i.e., the road to hell is paved with good intentions) and abuse by elected and appointed politicians for their personal and political benefit. I would not make those mistakes.

Revamp the Conservation and Liquidation Office

Second, I would completely revamp the Department of Insurance Conservation and Liquidation Office (the "CLO"). The CLO manages insurance companies during rehabilitation and liquidation. The CLO is supposed to marshal the assets and settle all of the liabilities of defunct insurers in a timely and cost-efficient manner. Instead, as happened with the Mission Insurance Group, Executive Life Insurance Company, and numerous other situations, the assets of the defunct insurer are wasted by paying multi-million dollar consulting fees to politically favored individuals and groups, who often are unqualified for the task at hand. Those consulting fees ultimately generate political contributions and other benefits for the regulators and their political allies. The California State Auditor recently (July 2001) issued a report very critical of the CLO (For example, in the summary, it states

"This report concludes that the CLO does not adequately safeguard and conserve insurance companies' assets by following prudent business practices and adhering to established controls. During our review, we identified significant weaknesses...we noted that the CLO does not effectively manage its contracts...the CLO uses a basis to allocate certain of its costs that is not equitable...the CLO has not recently updated its estate closing plans or prepared cash flow projections as a means for ensuring that investment decisions are optimized."

It goes on to say that

"Moreover, the department and the CLO have not addressed many of the issues raised in our previous two audit reports..."

No one in the last 3-4 administrations (even predating Garamendi in 1990) has done anything about the waste of millions (perhaps billions) of dollars of assets of defunct insurers. The California Insurance Guaranty Fund usually pays the claims (or most of the claims) of defunct insurers and becomes a creditor of the estates. However, the funding for CIGA ultimately comes from the citizens of California in the form of surcharges or increased rates on insurance policies. I have personally organized and managed rehabilitations and liquidations of several insurers in such a way that there was not one dollar of cost to the tax payers or insurance consumers of any state in which the companies conducted business.

Reduce Administrative Bloat

While accomplishing these major goals, I plan to drastically reduce the budget of the insurance department. Prior to 1988, the insurance department budget was about $28 million per year. It now is about 5-6 times that ($128 million in 1998 and still growing to, I think, about $150 million in 2001).

California used to have a reputation for competent insurance regulation, along with a few other heavily-populated states like New York and Illinois. Since we've had elected commissioners, we've become a national joke. With $28 million in the late 1980's we could accomplish everything that needed to be accomplish (and the Department wasn't exactly understaffed). At least $100 million could be subtracted from the budget and no one (other than the political hacks and the dead weight) would notice.

None of the other 13 candidates has any insurance regulatory experience except John Garamendi and his tenure was a disaster. He spent four years having the courts overturn all of his unconstitutional and impractical decisions. To the detriment of its policyholders, he gave away $3 billion of the assets of Executive Life Insurance Company through utter stupidity that the current commissioner is trying to recover. In a meeting with FEMA representatives in 1994 discussing possible federal involvement in providing earthquake coverage, he was described by the Clinton administration representatives as "perhaps the most arrogant [expletive deleted]" they'd ever met. He lists his current occupation as "businessman/rancher" when, in fact, he has spent most of the time since leaving office as Insurance Commissioner as a lobbyist and a paid political hack for the Clinton adminstration.

Finally, I have actual relevant regulatory experience. As you can read in my professional biography, I have helped several state insurance departments and other federal and state agencies solve insurance regulatory problems. I worked with regulators when I rehabilitated and liquidated insurance companies and solved their problems for them. I have worked with state legislatures to help them understand the problems and devise realistic, cost-effective, solutions to insurance regulatory problems. No one else has that experience.