Bill to Establish a Consumer-Based Organization to Watchdog Insurers Clears First Hurdle

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First Legislative Response To Quackenbush Scandal

Sacramento — Legislation sponsored by the Foundation for Taxpayer and Consumer Rights (FTCR) to create a new consumer-oriented watchdog organization to advocate on behalf of insurance policyholders before the Department of Insurance, the legislature and courts passed the Senate Insurance Committee on a vote of 6-4 today. SB 1738, authored by Senator Tom Hayden, is the first legislative response to “Insurancegate.”

“This vote signals that the response to Insurancegate portends potential gains for the policyholder,”stated Pamela Pressley, FTCR staff attorney and bill drafter. “While Insurance Commissioner Quackenbush is being investigated for his lax enforcement actions taken against insurer abuses, the Legislature can create the Policyholder Association to keep a watchful eye on the Department of Insurance.”

The bill creates a non-profit, public benefit corporation based on the Ralph Nader-conceived Citizen Utility Board (“CUB”) model, that grants the organization access to DMV and insurer mailings as a way to inform consumers about its mission and pool resources to hire advocates and experts to counter the industry.

“We just took the first step towards establishing an independent insurance watchdog,” said Senator Tom Hayden. “This bill gives insurance policyholders a way to protect themselves from unfair rate increases and insurance industry abuses.”

“If I had an independent watchdog like the Insurance Policyholder Association on my side, my individual complaint against AIG Insurance for delaying and repeatedly lowballing my legitimate insurance claim for over two years may have been taken more seriously,” states Helen Ponte, Alta Vista resident who testified in support of SB 1738. “As it stands, I was told that my complaint with the Department of Insurance would take up to 60 days or longer to investigate. It has now been over three months since the DOI began its investigation and I am still waiting for a satisfactory resolution.”

Following the highly-effective advocacy methods used by established Citizen Utility Boards (CUBs), the Insurance Policyholder Association will, under the direction of a democratically-elected board and through membership donations rather than tax dollars, perform the following services:

S conduct research and provide information to the public concerning the quality and cost of insurance services provided by insurers;

S advise and watchdog state agencies in their promulgation of any standards and regulations related to insurance;

S advocate legislation or other proposals to protect and promote the interests of insurance policyholders; and

S represent and promote the interests of insurance policyholders before administrative and judicial bodies by initiating, intervening or participating in proceedings related to insurance.

Insurers that oppose SB 1738 claim that having too many advocates on the side of consumers will confuse California citizens. According to these groups, more consumer advocacy is not needed beyond the current roles of government oversight agencies:

“The purpose that SB 1738 seeks to achieve – protecting and advocating the interests of policyholders – is already addressed under current law. SB 1738 (Hayden) does nothing more than create an additional level of consumer advocacy on the same exact issues.”

Personal Insurance Federation of California

“The Alliance is opposed to SB 1738 because it would displace the central role of the Insurance Commissioner to regulate the insurance marketplace in California.”

–Alliance of American Insurers

“While the goal of protecting insurance consumers is undeniably worthy, we believe that existing consumer protections will inevitably be more effective with the Legislature and a Commissioner both elected by the voters of California. We believe that this existing system of regulator and an every-watchful (sic) Legislature will be more beneficial for consumers than the system envisioned by SB 1738.”

Association of California Life and Health Insurance Companies


For fact sheets on the Insurance Policyholder Association, visit the Insurance section of FTCR1s websiteat : The Foundation for Taxpayer and Consumer Rights is a non-profit, non-partisan 501(c)(3) organization dedicated to advancing and protecting the interests of consumers and taxpayers.

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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