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Unlike many voters, the hundreds and thousands of independent insurance agents and brokers in California know the November 2 election will be a pivotal one. After all, on that day, Californians will select a new insurance commissioner, charged with regulating the approximately 1,500 insurance companies doing business in the state and the fourth-largest insurance market in the world at about $160 billion.
The leading candidates — Democrat Dave Jones and Republican Mike Villines — both are veteran state legislators being termed out of their current Assembly offices. While they agree in several areas on the priorities the new commissioner will face, they have ideological differences in their approach. Recently, Insurance Journal spoke with the candidates to find out why each believes he is the best person for the job.
Assemblyman Dave Jones
Democratic candidate Dave Jones is an Assembly member from Sacramento serving his third term. He chairs the Assembly Health Committee and serves on the Appropriations, Judiciary and Accountability and Administrative Review committees. During his time in the Legislature, he has obtained passage of more than 70 bills – including a host of insurance-related regulation, such as a bill that prohibited health insurers from charging a price differential based on gender and one creating green insurance incentives.
A Harvard Law School and Kennedy School of Government graduate, and an advisor to former U.S. Attorney General Janet Reno, Jones believes he has the experience to oversee “an incredibly important industry that … touches on every aspect of individuals’ and businesses’ lives and operations.”
Jones said he will be able to balance consumer, business and industry needs. “I understand that this is an office that has extraordinarily important powers. It has to be exercised in a thoughtful and deliberate and judicious way,” he said, noting he has been trained to make decisions in a way that “is fair to all parties, that provides transparency and balances the appropriate interests.”
Moreover, he doesn’t believe that consumers and businesses are necessarily adversaries. For instance, when a major health insurance company earlier this year announced a 75 percent increase in rates being charged to its small-business clientele, Jones said he recognized that independent agents and brokers were outraged and distressed that they had sold this product to their small business clients. In this dilemma, Jones proposes to provide the insurance commissioner authority to reject excessive health insurance rate increases, so the insurance agent community and businesses are not being hit by dramatic rate hikes.
Jones also believes employers in the Golden State cannot withstand excessive rate hikes in workers’ compensation. “When workers’ comp carriers seek a 30 percent rate hike in the middle of the worst recession since the Great Depression, it’s a huge problem for California’s businesses,” he said, citing the Workers’ Compensation Insurance Rating Bureau’s recent recommended 30 percent rate increase, then revised 27.7 percent rate filing.
“I share the Governor’s view that medical costs are not rising at anywhere near the rate increase proposed by the Workers Compensation Insurance Rating Bureau, and the cost of claims administration is actually going down. The rate increase at this time is not justifiable It would be crippling for California businesses,” he said. “By the same token, I do recognize that we need to have a viable workers’ compensation market.”
In addition to taking a look at rate setting in the workers’ compensation insurance system, Jones said he will examine earthquake insurance and green insurance options, as well as tackle national health care reform requirements, if elected.
He is concerned about the affordability of earthquake insurance, as well as its limited subscription rate.
“We face a huge risk and enormous cost that we know eventually will befall us, and we need to figure out how to get more people to take up earthquake insurance.”
Jones said he will try to make earthquake insurance more affordable, lower the cost of deductibles and advocate for a national natural disaster risk pool, similar to the flood insurance program.
Jones also believes the insurance commissioner can encourage business and innovation with green insurance opportunities. “There is a real opportunity here in California to look at the question of whether the growing green tech and clean tech economy is adequately served by insurance products, and whether insurance regulations are in some ways stifling the growth of that economy,” he said.
Jones authored a new law that facilitates personal car sharing to help reduce traffic and air pollution while insulating individuals from personal liability arising from the sharing of the vehicle.
The new commissioner will have to implement national health insurance reform, and Jones said he would monitor the heath care insurance exchange that would allow people who don’t have insurance provided by their employers to shop in a competitive market. A new health care exchange here in California will provide opportunity for up to 6 million Californians to purchase affordable health insurance, and small and medium businesses as well, he said. Consequently, Jones said he wants to ensure that health insurers don’t “cherry-pick” the market and increase the portion of sick people in the exchange, leading to higher rates and carriers exiting California.
Assemblyman Mike Villines
Republican Mike Villines was elected to the California Assembly in 2004 to represent the counties of Fresno and Madera. He serves on the board of the State Legislative Leaders Foundation, a nonprofit organization that provides educational programs for leaders of state legislatures, and on the board of the Sen. Kenneth L. Maddy Institute for Leadership and Ethics at California State University, Fresno.
Prior to serving on the Assembly, he was an aide to former Gov. Pete Wilson, a chief of staff to former state Sen. Chuck Poochigian, and a public relations and communications small business owner for six years.
Consumer groups have criticized Villines for being too closely aligned with insurance companies, but he notes he has taken no money from insurance companies and touts his record as an independent, pragmatic businessman who will put the protection of consumers first.
In 2006, he was elected to serve as Assembly Republican Leader, but he was forced out of the position because he broke party ranks in 2009 by agreeing to raise taxes to close the state deficit.
“I’m a former business owner That’s one of the reasons why I want to run for this nonpartisan job,” Villines said. “Being insurance commissioner is not a Republican job, it’s not a Democratic job. It’s a business person’s job with very specific things you’re supposed to do. I have the experience delivering for my constituents and cutting through politics. Sometimes that makes me the hero, sometimes it makes me the heel. But here’s a guy who’s independent, who puts voters first.”
Villines said that if elected, he plans to protect consumers, keep rates low, protect solvency and ensure freedom of choice in insurance. He doesn’t believe consumer and business interests are necessarily in conflict.
“Ideally, you get to a spot where everyone gets what they need. . . [Y]ou have to negotiate what’s good for both sides . . . I want everyone at the table, to get everyone there, and find the best solution,” he said. “I’m a pragmatic person. This isn’t a philosophical job; it’s a day-to-day, taking care of consumers and hopefully businesses, creating an environment that allows them to thrive and compete, which benefits consumers. We should all be partners to create more jobs and get product out quicker.”
On Villines’ list of priorities are to combat insurance fraud, implement efficiencies so new products can reach the market more quickly, and address workers’ compensation and earthquake insurance rates.
Insurance fraud costs every Californian an average of $500 per year. Villines said he’d like to cross-share information with law enforcement and motor vehicles officials, and leverage technology to go after those who are committing illegal acts.
He’d also like to see rates and products approved more quickly, which he would do with an improved customer service approach at the department. He said California is notorious for taking a year or more to approve new products, when some states do it in 60 to 90 days.
“When someone wants to reduce rates, we should approve that right away and move it through the process. That’s really a healthy thing for the state,” he said. “It’s good for a agents and brokers to be able to offer more choices and better service.”
Like his opponent, Villines believes the 27 percent rate increase sought by workers’ compensation insurers “would devastate small businesses.” The industry needs to consider what’s reasonable, he said. “Is it 27 percent? I don’t think so. That shows a disconnect with reality and the economy.”
Villines said he would work to keep rates as low as possible, but if increases are necessary, he would first communicate with small businesses so they understand why an increase is important. Second, he would not raise rates without trying to reduce inefficiencies. “If workers’ comp rates need to go up, then we need to see corresponding reforms on fees,” he said.
Villines said earthquake insurance needs to be made more affordable as well. “We need to do a better job in creating a competitive structure for earthquake insurance,” he said. “It’s a very technical issue to solve, but I would like to find a way to rely less on reinsurance and have more competition in the market in heavily concentrated earthquake zones.”
The next commissioner will be charged with implementing national health care reforms. Villines said he wants to give Californians more affordable health care choices by, among other things, allowing them to shop for insurance across state lines. He also wants individuals and businesses to decide what benefits are in their health plans.
Ultimately, Villines said his decisions will be “tough but fair,” as well as consumer-driven, with an eye on economic recovery.
“There are over 300,000 insurance-related jobs in this state, and we need every single one of them,” he said, noting California’s nearly 13 percent unemployment rate.