Insurance Journal staff writer Cynthia Beisiegel recently caught up with California Insurance Commissioner Harry Low at the NAII Annual Meeting in Los Angeles. Commissioner Low shared his thoughts on the improvements he and the Department of Insurance have accomplished over the past couple of years, as well as the major issues Commissioner-Elect John Garamendi will face when he steps into office.
Cynthia Beisiegel: Your term as Insurance Commissioner is coming to an end. Looking back over the past couple of years, what achievements are you most proud of?
Commissioner Harry Low: We established a Code of Conduct and a Standard of Ethics, which I think is very strong and will continue to be strong, and that is no free gifts or free meals. We don’t take insurance money or anybody’s money for any purpose. We try to maintain that strong standard of conduct—fair and open competition for contracts and just to maintain a strong, ethical practice for the agency. Hopefully it applies across the board to other things we do. I think we made significant improvements for agents and brokers in getting tests done quickly, meeting with them, trying to address their needs, trying to have investigations to maintain that there be ethical and good agents. I think we’ve done a marvelous job in the Conservation and Liquidation office; [we] improved that management a great deal. I think just across the board I’m pleased with the improvements in the Department, and that brings respect and morale, which is so important.
Beisiegel: The next Insurance Commissioner will take office shortly. What are the biggest challenges he will face when he steps into office?
Low: I would say the hardening market is probably the most difficult. It’s not just homeowners; it’s across the board. Workers’ comp will continue to be a big problem, homeowners will spill over into things such as home construction, California Earthquake Authority; it will apply to the whole homeowners market—not just insurance, but sales and so forth. And then all these others areas of insurance-medical malpractice, insurance for elderly care, healthcare. I think there will also be high expectations that may have been built up in the campaign. There will be some changes and improvements that may be rather difficult to make in terms of workers’ comp, stamping out fraud, and healthcare. It’s a tall order. The budget in California, with the freeze on employees, even though we’re specially funded from the insurance monies… I think that the budget will continue to be very difficult for the next several years.
Beisiegel: How long do you think the hard market is going to last from here on out?
Low: I would say two, three years. We hope that it turns, but I think the economy is one big factor, plus the high cost of medical care, repair increase, fraud, all of those things will challenge the hardening market.
Beisiegel: You endorsed John Garamendi for Insurance Commissioner. Tell me a little bit about why you think he is the best candidate for Commissioner.
Low: I just felt that he had a little more experience. I’ve talked to both [Garamendi and Gary Mendoza]. I’ve known John Garamendi a little bit longer. I think that he would build on and carry out many of the things that we’ve done. I think he has a very strong appreciation for what we’ve done. I’ve offered to help him on a pro bono basis to the extent that I have time to do that. I just thought that he would be the better candidate.
Beisiegel: Let’s talk about workers’ comp. You had sent a warning to State Fund a couple of months ago regarding their financial stability. We all know that there are many other problems involving the lack of private carriers. How are we going to fix the workers’ comp?
Low: We’ve continued to negotiate with SCIF. They’ve done some reinsurance, they made some loss portfolio transfers, and they’re reducing some of their market share. They’ve built up reserves, and I think they’re making improvements. Hopefully the freeze on them will not cause more problems. I think it’s brought more companies interested in coming to California. I think some of the other companies that do some workers’ comp market are also stabilizing. Hopefully this will start to bring back a little more competition and improve the industry. The long-range plan, and I tried to do this at the beginning, calls for really major reform. I gave it some consideration when I started, because I was once a Workers’ Comp Appeals Commissioner and I worked in this field as a judge and as a mediator, so I knew a little bit about it, but there are just so many things that have to be done. I don’t know whether they will be done…. Somebody’s got to grab hold of this.
Beisiegel: What is your forecast for the homeowners market and the mold situation?
Low: I think the mold situation is less of a problem now than I think that was feared several months ago. I think homeowners insurance is a problem with just the hardening market. Companies are losing money and don’t want to get into it, fearful of the huge losses they may incur in the event that there is water damage or other kinds of claims. I am a little concerned about the anecdotal stories that our consumer hotline hears about just making an inquiry about thinking about making a claim and then being denied renewal insurance. There are going to be lots of problems there. It certainly affects a lot of consumers. We just have to find some kind of a solution. We’ll try to find ways to encourage renewals for a more competitive market. We’re getting lots of calls. I haven’t talked directly to the Fair Plan yet, but my people tell me they’re getting all of these applications. It’s one thing just to call, but they’re actually applying.
Beisiegel: I understand there are some last-minute regulations that you are trying to implement before you leave office. Which of those will most affect property/casualty agents?
Low: The privacy regs, prior approval of rate regs. We will have uniform penalties on market conduct exams. We’ve had some regs on the Fair Practices. They may affect more of the insurance companies and adjusters. Those are some of the big ones. Prior approval of rates goes way back to Prop 103 14 years ago. We’ve had some informal bulletins but I say no, let’s put them in regs, let’s put them on the Internet so everyone can look at them. Lets’ adopt these practices in regs. So we’re trying to put it all in writing so people can’t say, ‘well, this is the way we’ve always done it.’ It’s the Prop 103 setting of rates. These regs will establish the process in the way we approve rates.
Editor’s note: Please see Insurance Journal West Dec. 16, 2002 for more on regulations.
Beisiegel: What are your plans after you leave office?
Low: I plan to return to private judging. I’m gong to be re-joining JAMS, which is Judicial Arbitration Mediation Services. It was work that I did previously, and I’ll be mediator, arbitrator, those kind of roles. I enjoy doing that. I want to keep that very active. I think that my insurance knowledge should be an asset.
Harry W. Low pledged his oath of office to become California’s 37th Insurance Commissioner on Sept. 18, 2000. Low is a Retired Presiding State Appellate Court Justice. His legal service includes over a quarter century of judicial leadership on the California Court of Appeal, and the San Francisco Superior and Municipal Courts, serving as president of the California Judges Association in 1978-1979, and chairman of the Appellate Judges Conference of the American Bar Association in 1990-1991. Before he became a judge, Harry Low was a Commissioner of the Workers’ Compen-sation Appeals Board, and a California Deputy Attorney General in the Civil and Tax Division. Upon his retirement from the bench in 1992, Justice Low became a private judge for the Judicial Arbitration and Mediation Services (JAMS). In this professional role, Justice Low utilized over 30 years of dispute resolution experience to conduct a wide variety of mediations, arbitrations, and settlement conferences.
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