● Run California’s largest consumer protection agency
● Oversee more than 1,500 insurers with 300,000 workers
● Control a tenth of our largest state’s economy
● Manage 1300 employees with a $200 million budget
● Field 300,000 consumer assistance calls annually
● Handle more than 35,000 consumer complaints
● Issue 170,000 agents and brokers licenses
● Investigate 24,000 suspected fraudulent referrals
● Initiate about 1,000 arrests annually
● Recover more than $48 million per year for consumers
FULL TIME POSITION, LONG HOURS—
● Requires election by voters of California
● Need to know about insurance and collision repair
Who is Assemblyman Dave Jones and why does he want to be California’s next Insurance Commissioner?
ABN—Let’s start with some background on the California Department of Insurance (CDI). It’s been estimated that CDI oversees as much as 10% of California’s economy.
Given the budgetary and fiscal problems in California, how should the Insurance Commissioner and the Department of Insurance manage their influence on job development and the business environment?
DJ—Ensuring that insurance is available, accessible and affordable is critical to job growth in California.
Rising insurance costs are a major cost factor for California businesses.
For example, workers compensation insurers are proposing a 29% rate increase that would cripple California businesses. I do not think this is the time to hit California businesses with this massive rate increase.
In addition, the unequal bargaining power of insurance companies often raises costs for California businesses. For example, workers compensation insurers have taken to inserting contract language into their contracts that allow them to drag California businesses to far off states to resolve disputes. Businesses have complained to me that they have been forced to fly their managers, staff and lawyers to New York and Delaware to resolve disputes with their workers compensation carriers. I authored AB 2490 to protect California businesses from this practice and to prohibit workers compensation carriers from forcing these clauses on California businesses. After all, if the business is in California, the dispute arose there, and the contract was written there, why should the insurer be allowed to drag the California business to New York to resolve a dispute?
Another opportunity to assist economic development is in the area of the growing green tech and clean tech economy. We need to make sure that innovative green technology and clean energy companies have the insurance they need to cover their operations and grow our economy. Additionally, I have legislation sitting on the Governor’s desk—AB 1011—that enhances the investment opportunities for insurance companies in green technology and clean energy in low and moderate income communities.
The Department of Insurance’s budget does not come out of the general fund—the cost of regulating insurance companies is borne by fees on insurers, not taxes collected from taxpayers. In fact, the department’s operations budget has been reduced in recent years from approximately $175 million to $156 million.
ABN—The CDI commissioner used to be appointed by the governor prior to 1991. When the elected position of Insurance Commissioner was created by passage of Prop. 103, the Department’s role was expanded to require property and casualty insurance company rates be pre-approved by the Department before going into effect. Yet the current commissioner, Steve Poizner, has said that California has virtually no power over insurance rates (other than the ability to deny insurers that spend less that 70 percent of premium dollars on medical benefits the license to sell policies in the state). If so, what could a commissioner do to help keep costs of health care and auto insurance affordable?
DJ—Under Proposition 103, the Insurance Commissioner has the ability to approve increases or decreases in auto, property and casualty insurance rates. But the Insurance Commissioner does not have the authority to reject excessive health insurance rate hikes. We need to change the law to give the Insurance Commissioner this authority.
I have long fought to give the Insurance Commissioner the right to approve or disapprove health insurance rate increases. I authored AB 2578 this year in the wake of the Anthem Blue Cross rate hike of 39% to rein in excessive rate hikes, which are hitting both consumers and businesses alike.
Federal health care reform will change the 70% medical loss ratio to 80 or 85%, depending on the nature of the health insurance product. This means that at least 80 cents on each premium dollar has to go into health care. This is a good change. I will use the power of the Insurance Commissioner to enforce these new requirements so that more of the premium dollar goes to pay for actual health care, instead of insurer profits.
ABN—Currently, California suffers from divided bureaucracies. The one that oversees health coverage reports to the governor, while the state insurance commissioner governs other health policies.
You’ve said this could be better handled by combining the two functions under the elected post. You also have pledged to serve out two full terms as commissioner and not use the post to run for higher office, as past commissioners have (including Steve Poizner who was a candidate for the Republican Governor’s nomination). Should the commissioner have a direct hand in determining health insurance rates? Should the commissioner distance him or herself from other state offices?
DJ—California is the only state in the nation where managed care plans are overseen by the Department of Managed Health Care while individual and PPO health insurance products are overseen by the Insurance Commissioner. I believe that both offices should be combined. The division in authority is confusing to everyone and it is inefficient.
I have long fought to give the Insurance Commissioner and the Department of Managed Health Care the right to approve or disapprove health insurance rate increases. This year, my Assembly Bill 2578 failed to pass the State Senate, but I am committed to continuing this effort as Insurance Commissioner.
I plan to serve two full terms as Insurance Commissioner.
ABN—The legislature has little control over health care rates, largely because industry lobbyists have killed efforts to change a rules-free marketplace. You have sponsored Assembly Bills 119 (which stops “gender rating”, i.e,. charging men and women different rates for the same health insurance policies in the individual health insurance market, and 1218 (to slow the recent annual double digit health insurance premium increases, which are now preventing larger numbers of employers and individuals from affording health coverage). These bills were signed into law earlier this year and have influenced the national health care reform debate. You mentioned State Senate appropriations committee voted on your AB 2578 bill (to give the state’s elected insurance commissioner broad powers to approve or deny increases in health coverage premiums.) Can you comment on the future prospects there?
DJ—I have long fought to give the Insurance Commissioner and the Department of Managed Health Care the right to approve or disapprove health insurance rate increases. This year, my Assembly Bill 2578 failed to pass the State Senate, but I am committed to continuing this effort as Commissioner.
ABN—Almost all large U.S. companies cover some of their employees’ health care premiums, compared with less than half of businesses with fewer than 10 employees. Granted that federal health care reform is widely misunderstood (6 million presently uninsured California residents will now be eligible for medical coverage as part of the new federal health care reforms), but most California small businesses do not currently provide health insurance to their employees. What can small businesses like collision repair shops, who do provide coverage, expect from CDI regarding managing health insurance premiums in the future?
DJ—A critical part of federal health care reform will be the establishment of a California health benefits exchange. The idea is simple—to pool the buying power of the 6 million Californians without insurance, including employees of small businesses, so that we can get better rates from the health insurers. As Insurance Commissioner, I will work to assist in the design of the new health insurance exchange, where small businesses will be able to go to buy affordable health insurance for their employees.
Although my proposal to directly regulate health insurance rates has not become law, I will continue to press insurers to make sure that more of the dollars Californians spend for health insurance go towards medical care, and not to insurer administration and profits. And I will continue to champion changes in the law to allow the insurance Commissioner to reject excessive health insurance rate hikes.
ABN—Since 2003, coming up with a fair and accurate process to do a labor rate survey has been an on-going issue in California. Currently, insurers are only required to get information for the survey that includes the name and address of the auto body repair shop and the total number of shops surveyed, which allows DRP shops to be included in surveys, thereby depressing the effective labor rates.
What else should insurers be required to do?
Should there be an independent agency conducting the surveys?
DJ—I am concerned about the fairness and reliability of the surveys, including the weight given to DRP rates. As Insurance Commissioner I will work closely with all interested parties to review the survey methodology and who should conduct the survey. I think that we would be better served by having an independent agency, like the Bureau of Automotive Repair, conduct the survey.
ABN—You’ve been called a “consumer champion” and are the only person to receive a 100% rating from the Consumer Federation of California for your 2009 voting record on key consumer rights bills. You have the endorsements of the Orange County Professional Firefighters Association and San Francisco Firefighters Local 798, among many others.
You’ve also taken a prominent interest in collision repair issues. Can you tell us why collision repair is of central concern to a consumer advocate like yourself?
DJ—Collision repair is important because of the safety issues involved. Auto body repair is not a simple transaction. Consumers often pay premiums for years before experiencing a collision. After a collision, the auto body repair shop has an interest in satisfying the consumer by making the car safe and returning it to the condition it was in prior to the collision. The insurer has an interest in driving down the cost of the repair, which puts auto body repair shops in a difficult position. This is a clear case where the government should establish rules that protect consumers and make sure all cars are repaired safely.
ABN—What would be the first thing you would do as the new Insurance Commissioner?
DJ—As it relates to the collision repair industry, several things I believe need some immediate attention. One of these is the enforcement of existing prohibitions against steering. This continues to be a problem and one that merits much greater attention.
Second, there is the problem presented by the labor rate surveys. Based on conversations I’ve had with leaders and members of the collision repair industry, they feel that the true labor costs that collision repair businesses are facing are significantly understated. I think part of the problem stems from the fact that the labor rate surveys are being done by an entity that has relationships with the insurance industry.
I am reminded specifically of a similar problem that occurred in the securities and bonds markets when rating agencies in those markets were allowed to have financial relationships with the very entities that were supposed to rate them. As a result, Moody’s and other rating agencies in the financial markets produced ratings that were much higher than they should have been and investors were given inaccurate information. This strikes me as similar—these financial relationships that exist between the entities that conduct the surveys and the insurance companies are problematic at best, in my opinion.
One suggestion that has been made that is certainly worth exploring is to have a requirement that independent entities can conduct these surveys and perhaps have an independent agency conduct the surveys, like the Bureau of Automotive Repair (BAR). A number of leaders in the collision repair industry have proposed this idea to me and I think it’s certainly something that’s worth exploring. It would obviously require legislation, but that’s the kind of thing a new Insurance Commissioner could champion.
Third, there’s the issue of non-OEM or aftermarket parts and some of the issues raised by leaders in the industry about the comparability of those parts with OE parts. This is definitely an issue that warrants attention from the next Insurance Commissioner. So, those are some of the major issues. I think there are many others that are obviously out there. But these are simply examples of things I will turn my attention to that are reflective of a broader set of problems in the relationship between insurance companies and the collision repair industry.
ABN—Please tell us in brief your history of involvement with auto repair and specifically the auto body repair industry.
DJ—My background and training as a legal aid lawyer, which is what I did for 5–6 years after graduating from Harvard Law School. During this time, I provided free legal assistance for low-income families, and in doing so, I did a lot of consumer protection work, and that’s been a big part of my career. After that, I was a senior aide to U.S. Attorney General Janet Reno. Then I served as a city council member, and currently I’m an assembly member.
In each capacity, I’ve worked a lot around consumer protection in a wide range of capacities at many different levels. And one of the biggest consumer protection issues out there right now revolves around consumers whose cars are damaged and who have insurance and who are trying to get the best possible and safest repair they possibly can. But oftentimes they’re encouraged by their insurers to move into a direction that may result in an unsafe repair of poor quality. That’s why issues like steering and the quality of aftermarket parts are just some examples of this problem. I began to become familiar with these issues as a council member representing a portion of my town that contained several members of the collision repair industry, and I learned a lot about the issues they were facing, and the issues their customers were also facing. Then we started working on these issues in the Assembly, specifically as a member of the State Assembly.
I authored Assembly Bill 1179, which expands the disclosures required by automotive insurance companies following an accident. And that’s important, because many people don’t realize that they have the right to get an independent repair estimate or negotiate with their insurance company about the value of the estimate offered by the insurance company.
Last year I was one of the few in the Assembly who opposed Assembly Bill 1200, which, unfortunately, did pass. [Search autobodynews.com] This bill undermines existing law which prohibits insurers from requiring that a automobile be repaired at a specific automotive repair facility, but I played a role in trying to stop bills like this one, that roll back consumer protections as well.
ABN—Do you think the contentious issues that exist between the insurance companies and body shops will ever dissipate or disappear completely?
DJ—As long as you have a situation where the insurance companies make more money by driving their costs down, as a result of reducing what they pay to auto body shops for safe repairs, there will always be this tension. And so it’s important that we have an Insurance Commissioner who is strongly oriented towards consumers who have had the opportunity to work with the collision repair industry to make sure that we provide a level playing field. You have insurance companies that have enormous economic power and they have the ability to impede or cut off the livelihoods of small business owners who own collision repair shops by essentially denying them referrals. Insurers have to be careful about that, because there are laws prohibiting steering, but we know it happens anyway in many instances. As long as there is this huge economic inequity between body shops and insurance companies, we’re going to need an Insurance Commissioner who is focused on addressing this imbalance.
ABN—Will federal insurance reform have any impact on the collision repair industry in the near future?
DJ—There have been some suggestions made in the Federal Administration and in Congress to federalize insurance regulation. I’m not just talking about health care reform legislation, which I supported, but more broadly all aspects of insurance regulation would be federalized. I feel that this would be a big mistake for Californians and for the collision repair industry, because we already have fairly robust regulations that protect consumers here in California as opposed to other states. If that authority was taken away from us and taken over by the Federal government, there’s every likelihood that it would be a race to the bottom. In other words, the Federal government would adopt the regulations from those states with the weakest form of regulation. There would be uniformity, but it would be weak and it would really disadvantage California consumers and collision repair facilities here in California. I am opposed to federalization of insurance regulation, because it’s a lot better to have a state regulator who is closer to the ground and makes adjustments based on what’s happening here, as opposed to being driven by events in Mississippi, Louisiana or Georgia.
ABN—How will you continue to be a consumer advocate without becoming beholden to the insurance companies?
DJ—I consistently refuse to accept donations from insurance companies or anyone associated with the insurance industry. I think it’s important that there’s not a conflict of interest, so I’m not soliciting or accepting contributions from the insurance industry.
ABN—Has the bailout for the American car manufacturers been a success in your opinion?
DJ—We were faced with a total collapse of that industry and I think that the federal government was correct to intervene. It was a terrible situation where a lot of people lost their jobs and their businesses, but if the government hadn’t intervened, it would have been a lot worse. So, while it’s not perfect, it is good news, because these companies are showing profitability again and it looks like the government will get repaid and we’ve protected an important part of what remains of our dwindling manufacturing base.
ABN—Where do you think the collision repair industry will be in 5–10 years?
DJ—My hope is that we’ll continue to have an independent collision repair industry in this country. I think the industry feels under assault and rightly so. One of my main goals as the Insurance Commissioner is to make sure that consumers have choices within an independent collision repair industry and the insurance industry isn’t pushed to make profits that sacrifice safety and quality.
ABN—Are you truly going to enforce laws that are already on the books?
DJ—I’m going to support the existing laws while always looking for ways to strengthen and improve them. There’s no question that sufficient enforcement hasn’t existed in a number of areas and I intend to push for full enforcement.
ABN—How will you be able to stand up to the insurance companies?
DJ—I have a history of standing up to the insurance industry. If you look at my legislative history, I’ve been successful in passing a number of bills that were opposed by the insurance companies, and I not only got them passed but got them signed into law. I’ve been very independent and consumer-oriented, and am very willing to take on these fights. Taking no money from the insurance industry will make sure that I can and will remain independent.
ABN—The current commissioner was often faulted because he appeared to want the insurance comissioner’s job as a stepping stone to higher office. How will you be different than your predecessor?
DJ—I have a stronger background and record for success in consumer protection and I think that I have demonstrated time and again that I can be effective and successful in protecting consumers and small businesses. One of the biggest differences between me and other people who’ve held this position, is that I am not using this office as a stepping stone. My plan is to be the best possible Insurance Commissioner and to focus on the job at hand, as opposed to the next job. I’ve always found that if you do a good job at something, opportunities will present themselves and if I can continue in public service, that would be fine, but if the last thing I do is to be the best Insurance Commissioner I’ll be very proud and happy with that.
ABN—Thank you very much. I think a lot of our readers will wish you great success in the election.