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NEWS RELEASE
Mar 31, 2004


CONTACT: Doug Heller - 310-392-0522 x309

Consumer Groups, Insurance Commissioner Denounce Federal Attack on California's Landmark Insurance Reform Prop 103

Insurance Deregulation Proposal Would Cost Consumers Billions, Weaken Consumer Protection Laws
Consumer groups nationwide condemned a Congressional proposal to gut state insurance regulations in exchange for a federally coordinated deregulation of the insurance industry, in letters and testimony before Congress today. California Insurance Commissioner John Garamendi also opposed the plan, which will be presented by Ohio Republican Congressman Michael Oxley at the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises hearing today.

The Oxley proposal would eviscerate most state regulation of insurance, including California's 1988 insurance reform initiative, Proposition 103. Prop 103, which regulates insurance company rate hikes, has saved California drivers more than $23 billion on their auto insurance, according to a study by the Consumer Federation of America. In California, auto insurance premiums have declined 22% since 1989, while rates have gone up 30% nationwide. In 2003 alone, Prop 103 was used to blocked more than $35 million in medical malpractice insurance rate hikes for doctors and more than $50 million in proposed homeowners insurance hikes by two insurers.

"By undercutting states' rights to regulate the insurance industry, Representative Oxley proposes to do away with California Proposition 103, the nation's most effective insurance consumer protection law," said Doug Heller, executive director of the Foundation for Taxpayer and Consumer Rights (FTCR), a California-based non-profit organization. "The Oxley plan would ensure higher premiums and more problems for insurance policyholders nationwide, but it would be a particularly devastating blow to California consumers, who save billions of dollars every year as a result of Prop 103."

More than 50 consumer advocacy organizations nationwide and the AFL-CIO sent a letter to Oxley in opposition to the plan. A copy of the letter is available at insurance-reform.org. California Insurance Commissioner Garamendi also challenged the plan, calling it "a radical reduction of oversight of insurance companies [that is not] in the best interest of American consumers, taxpayers or the economy generally,"

Garamendi concluded:
"True reform will require the expansion of regulatory oversight through strong state initiative and coordination…preserving the quality and fairness of the claims process, and providing affordable insurance to the millions of American consumers and business who represent the policyholders that we serve. I am afraid the federal government is not up to the task. It will not invest enough resources in the process, and federal regulators are too remote from the problems the states deal with more effectively." [The complete letter can be downloaded by clicking here. ]

In the letter, Garamendi noted that under Prop 103 insurers have been more profitable in California over the past decade than companies have been in the nation as a whole. Regulation not only keeps premiums low for consumers, it also provides more stable and above average profits for the insurance companies, according to FTCR.

Insurance Interests Have Contributed $388,000 to Rep. Oxley Since 1993
The insurance industry has long been a primary backer of Representative Oxley. Since 1993, Oxley has received $388,041 from insurers, according to OpenSecrets.org. According to FTCR, the Oxley proposal is payback for the industry's generosity and reflects insurance companies' most sought after goals. These include the repeal of California's Prop 103 and the end of rate regulation across the country, which Oxley derides as "the travesty of price controls." Additionally, under the Oxley plan, states would be restricted from conducting thorough investigations of insurance company practices or reviewing new types of policies.

"The insurance industry has donated hundreds of thousands of dollars to Representative Oxley, who is returning the favor by pushing to destroy more than a century of insurance regulation," said Heller.

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FTCR's letter to the California Congressional Delegation can be viewed by clicking here.





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