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Aug 08, 2000

CONTACT: Doug Heller - 310-392-0522 x309

Legislators Weaken Quackenbush-Scandal Reform Law

The Assembly Elections Committee weakened Insurance Commissioner campaign reform legislation (SB 953 -- Speier) yesterday by recommending a watered down alternative to the outright ban on contributions from insurance industry sources to the Insurance Commissioner and candidates for the post. The new proposal would set a ceiling on contributions to the Insurance Commissioner at $5,000 per per year, based largely on the rules proposed in the Legislature's ballot initiative, Proposition 34. The committee postponed a final vote until later in the week.

"Insurance companies should not be allowed to provide campaign cash to the insurance regulator," said Doug Heller, consumer advocate for the Foundation for Taxpayer and Consumer Rights. "The public knows that Quackenbush sacrificed consumer protections to appease his contributors, and they want that to change. The Legislature should not shy away from reform."

A second aspect of the alternative proposal would apply certain existing conflict of interest laws (Gov't Code 84308) to the Insurance Commissioner. While there is some ambiguity about whether or not the law already governs the Commissioner, consumer advocates testified Monday that a simple application of the law would do little because of the narrow scope of the existing rule. A more expansive conflict of interest provision would be needed to clean the Insurance Commissioner's post of the conflicts so prevalent under the Quackenbush administration.

The conflict of interest provision (Gov't Code 84308), as proposed, would have had virtually no impact on the fundraising of Chuck Quackenbush. The law states that the Commissioner cannot accept contributions of more than $250 during and for three months after licensing similar proceedings from the entity involved in the proceeding. It does not effect such important issues as rate increases, market conduct examinations and other investigations into company behavior.

"Unless the legislation expands the proposal significantly, politicians look like they are trying to fool the public," said Heller. "Banning contributions from regulated entities at all times is the best way to avoid conflicts of interest."

FTCR and other consumer groups recently unveiled the Insurance Policyholder Bill of Rights as a model for post-Quackenbush reforms. As part of the platform, the consumer groups call for an outright ban on campaign contributions from insurance companies to the Commissioner.

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