`California Is Open For Business'

What a difference an election makes. For years, former California Insurance Commissioner John Garamendi had been battling 20th Century Industries, a leading insurer, all the way to the U.S. Supreme Court over state Proposition 103. Prop 103--roundly detested by the industry--is a 1988 voter initiative that limited insurance companies' rate of return and rebated to policyholders premiums deemed excessive. Although some companies gave in, 20th Century refused. But this year, when Garamendi's successor, Charles W. Quackenbush, approached 20th Century executives at a Los Angeles insurance-industry reception, they decided to hear him out. Within weeks, a deal was struck to settle the action.

"Quackenbush didn't have his time, his ego, and his lawyers wrapped up in this," says Richard A. Dinon, 20th Century senior vice-president. "His approach was more rational, more businesslike." Dinon is not alone in admiring the new commissioner's crusade to repair relations with insurers. Says David Schiff, editor of Emerson Reid's Insurance Observer: "Everybody loves him."

Well, not quite everybody. California's well-organized consumer-advocate community regards Quackenbush, a 40-year-old free-market Republican, as the enemy. They have attacked the former businessman and four-term state legislator for accepting $2.4 million in industry contributions to his election campaign. Almost constant bickering in local newspapers between Quackenbush and his nemesis, Harvey Rosenfield, author of Prop 103, has reached fever pitch. The criticism is getting to the 6-foot-4 former Army captain. "Please don't say I'm a friend of the industry," Quackenbush requests--an hour after telling a business group that the Rosenfield ruckus had him "sometimes wishing I had my tank back."

Quackenbush may not be an industry friend, but he's a lot more than an acquaintance. On Jan. 13, nine days after his swearing in, he set the tone by sending letters to 197 insurance companies declaring: "California is open for business, and we want you back."

Since then, Quackenbush, who had no insurance experience before his election, has approved earthquake-premium hikes of 100% and upward for two big insurers. He has also vowed to remove the requirement that any outfit offering homeowners insurance in California must also provide earthquake coverage.

BATTLES LOOM. Consumer advocates are especially livid over the 20th Century settlement, which Garamendi himself calls "a political payback." The deal releases the company entirely from interest accumulated on the $78 million in rollbacks it is deemed to owe policyholders, but the deal does provide at least $46 million to policyholders. After the settlement was reached, Rosenfield accused Quackenbush of costing consumers $221 million, including $74 million for the 20th Century settlement.

Yet to come are battles over 23 pending requests for rate increases and how to make insurers offer earthquake policies. Opponents of Quackenbush's attempt to solve this problem by uncoupling homeowners from earthquake coverage say that market may dry up if insurers are not forced to participate.

Even if Quackenbush survives these slippery issues, he may still be denied what he really wants: a more vigorous insurance market. After 20th Century settled with the Insurance Dept. and dropped its lawsuit, the Supreme Court upheld the Garamendi-designed Prop 103 regulations, dictating what Quackenbush may do. And even insurers without pending Prop 103 claims may be slow to become more active in the market. Robert W. Pike, general counsel at Allstate Insurance Co. in Northbrook, Ill., says that even if the earthquake issues were resolved, Allstate would still want to reduce its overall participation in California's earthquake market.

Worst of all, Quackenbush, an avid speechmaker whose political ambitions rival Garamendi's, may find that the regulatory policies he hopes will make California "irresistible" to business are quite resistible to voters.

Rosenfield says he wouldn't rule out a recall election. "[Quackenbush] has undertaken to protect the insurance companies at the direct expense of the consumers," he says. "If this continues, he won't be able to get elected dogcatcher in this state." And the guy has been in office only two months.


Chuck Quackenbush is overturning his predecessor's policy of playing hardball with insurers

JAN. 4 Quackenbush is sworn in as California insurance commissioner

JAN. 13 Sends letters to 197 insurance companies, saying "California is open for business" and assuring 37 of them that they have no Proposition 103 rollback liability

JAN. 18 Grants 100%-to-134% rate increases in Republic Insurance Group's earthquake insurance

JAN. 27 Forgives all accumulated interest and cuts a deal with troubled 20th Century Industries to pay $46 million

JAN. 27 Gives State Farm a 5.7% rate increase on homeowners' policies

JAN. 31 Grants a 100% increase in Allstate's earthquake premiums


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