Critical Decision in Insurance Department;

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New Commissioner Inherits Agency in Need of Leader

The San Jose Mercury News

The six candidates who want to run the state’s insurance department face a daunting task: taking over a department that most observers agree is ill-prepared to confront the issues it must face. Among the issues: rising insurance premiums, skyrocketing worker’s compensation costs and threats by insurers to stop doing business in the state.

For the first time since the Charles Quackenbush scandal tainted the department in 2000 with revelations of the commissioner’s coziness with the companies he was supposed to regulate, California voters will have a chance to elect an insurance commissioner.

The major candidates, Democrat John Garamendi and Republican Gary Mendoza, are both running campaigns that bank on their previous experience as state regulators.

Contribution limits

Garamendi was the state’s first elected insurance commissioner, from 1991 to 1995, while Mendoza is the former commissioner of corporations, which oversees most health care plans as well as securities and franchise offerings, credit unions and mortgage bankers.

Neither candidate accepted campaign contributions from insurance interests, to underscore their independence from insurers. Quackenbush accepted more than $6 million in contributions from the industry.

At the end of last month, Garamendi had more cash available to wage a campaign, $1.3 million compared with $577,000 for Mendoza. Garamendi’s bigger contributions come largely from labor unions, builders, law firms and Indian tribes. Mendoza also got his share of money from builders.

Controlling the cost of premiums “is going to be a big issue,” said Harvey Rosenfeld of the Foundation for Taxpayer and Consumer Rights in Santa Monica. Rosenfeld sponsored Proposition 103 in 1988, in which voters approved the popular election of the commissioner and set the stage for pro-consumer regulations.

Critical time

The $80 billion California insurance industry has a different perspective, but representatives agree the next commissioner needs a firm hand and strong skills.

“It’s a massively critical time,” said Dan Dunmoyer, president of the Personal Insurance Federation of California. “The commissioner needs first to look out for consumers but also to make sure the industry doesn’t run away from the state.”

Garamendi, 57, wants his old job back.

“The entire industry’s upside down and we need leadership to fix it,” he said.

As commissioner, Garamendi frequently clashed with the industry and the Republican governor, Pete Wilson, as he fought to implement voter-approved changes in insurance law.

Garamendi, who lives in Walnut Grove, said he took over an agency that “protected insurance companies, and changed it into the best consumer protection agency in this nation. And then Quackenbush destroyed it. I know how to fix it. I’ve done it, and I don’t need on-the-job training.”

But Mendoza, the former corporations commissioner, is no neophyte in politics and complex regulation.

And he said Garamendi has nothing to brag about from his first go-around as insurance commissioner. Garamendi “regulated by press release,” Mendoza said, and created a climate that drove out insurance companies to the point where today contractors can’t get insurance to build desperately needed condos.

The 47-year-old Sierra Madre resident also has a reputation as a “tenacious” regulator, Dunmoyer said.

As commissioner of corporations, an appointed post, Mendoza required Blue Cross of California to pay more than $3 billion to endow the establishment of two health care charities in return for granting the HMO for-profit status.

As insurance commissioner, Mendoza said his priority would be to strengthen the department’s consumer protection function while making sure the agency removes bureaucratic hurdles to attract companies to do business here. Competition, he said, is good for consumers.

“Right now we have customers chasing companies. We need companies chasing customers,” he said.

Others in running

Four candidates from smaller political parties also are vying for the job: Steve Klein, 52, American Independent, an ex-Marine who co-owns an insurance brokerage in El Cajon; David Sheidlower, 43, Green, a Wells Fargo Bank vice president in Oakland; Dale F. Ogden, 52, Libertarian, an insurance actuary and management consultant from San Pedro; and Raul Calderon Jr., 44, Natural Law, a postdoctoral fellow at the Stanford Center for Research in Disease Prevention.


Contact Chuck Carroll at [email protected] or (408) 295-3983.

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