Insurance Industry’s Extortion Campaign Fails

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Santa Monica, CA — An attempt by several major insurance companies to punish the elected Insurance Commissioner for ordering premium reductions for good drivers was defeated last night when Insurance Commissioner John Garamendi survived a $2.5 million independent campaign against him by the companies, the Foundation of Taxpayer and Consumer Rights (FTCR) said today.

FTCR is a non-profit, non-partisan organization that does not endorse or oppose candidates for public office. A core mission of the organization is the enforcement of insurance reform Proposition 103, enacted by the voters in 1988. In 2003, FTCR and other consumer groups petitioned the Commissioner to force insurance companies to begin basing premiums on driving safety record rather than zip code, as 1988 insurance reform Proposition 103 requires.

Garamendi, the state’s elected insurance commissioner, incurred the wrath of insurers last December when Garamendi ordered them to comply with Proposition 103. In April, representatives of State Farm, Farmers, 21st Century and other insurers privately informed Garamendi that unless he rescinded his order, they would run a multimillion campaign against him during his primary campaign for Lt. Governor. Garamendi rejected the insurers’ threat and later disclosed it to the public, calling it “extortion” and vowing he “would not be bought.”

Insurers then made good on their threat, spending an estimated $2.5 million against Garamendi in the weeks preceding yesterday’s primary.

Consumer advocates hailed the failure of the insurance companies’ campaign against the Commissioner.

“The handful of arrogant insurers who spent millions to punish the Insurance Commissioner for doing his job were trying to send a message to the candidates for insurance commissioner and every other elected official in the state: ‘defy us, and we will kill you politically,'” said Harvey Rosenfield, the author of Proposition 103 and founder of the Foundation for Taxpayer and Consumer Rights (FTCR). “But yesterday the public proved once again that it would not be fooled by the industry’s lies.”

FTCR has joined with the California Nurses Association in backing a measure on the November ballot that will prevent industries from “using their money to corrupt our elections and government,” Rosenfield said.

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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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