The insurance commissioner's power over what we pay for homeowners, auto and most commercial insurance means newly elected commissioner Steve Poizner has a greater impact on the pocketbooks of Californians than any other public official.

Poizner, a moderate with roots in the business world and public service, has to balance the two guiding perspectives he brings to the job: faith in the free market and a commitment to protecting the public. Given the uniqueness of the insurance market, Poizner needs to recognize that the only way to protect consumers and maintain a healthy market is to maintain the commissioner's role as a tough regulator and rulemaker.

Poizner will start his job with the enviable task of overseeing substantial price cuts in auto insurance. The consumer savings are associated with rules requiring insurers to base premiums primarily on a motorist's driving record rather than their ZIP code, a reform he pledged to fully implement while campaigning.

But quickly Poizner will find himself embroiled in a bitter battle over an important set of rules he promised to defend during the campaign. Insurers have threatened to sue to block regulations, issued by outgoing Commissioner John Garamendi, that establish guidelines to determine such rate-impacting factors as excessive profit, reasonable expenses and loss projections.

But defending the regulations is the easy part; the real test of Poizner will be whether he is actually willing to wield his regulatory authority on a day-to-day basis to keep rates low and unfair practices in check. The California insurance marketplace has seen a widening gap between the amount policyholders pay in premiums and what insurers pay out in claims. This ratio is a key indicator of price gouging and many insurers' rates deserve serious review.

Press or wait?

Several Los Angeles-based firms, for example, appear to be overcharging their customers based on the most recent data:

-Medical malpractice insurer SCPIE Indemnity paid out only $28 in malpractice claims for every $100 of premium paid by doctors and hospitals, about 43 percent less than the national average in 2005.

-Farmers Insurance used only 32 percent of business customers' premiums to pay commercial multi-peril claims.

-Fire Insurance Exchange (Farmers homeowners insurance affiliate) paid out 28 percent of what it takes in from customers, half the national average.

Several major insurers, including Farmers, are applying for across-the-board rate cuts for homeowner policyholders after Garamendi ordered companies to open their books. Will Poizner actively press other insurers to lower rates or just wait and hope for the other firms to voluntarily drop rates? Insurers will call for a go-slow approach. Consumers who pay the premiums will be reluctant to wait.

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