As new state Insurance Commissioner Steve Poizner gets settled into office this week, some local insurers will be looking to him to soften or even undo some of the moves made by his predecessor, John Garamendi.

Auto and property/casualty insurers especially want Poizner to roll back regulations they say will increase costs for many of their policyholders. In pinning their hopes on Poizner, they point to his business background.

“We hope he takes his understanding of how business works from his days as a Silicon Valley entrepreneur and applies that understanding to this job,” said Jerry Davies, spokesman for Farmer’s Insurance Group of Cos., the Los Angeles-based unit of Swiss insurance giant Zurich Financial Services Group.

Poizner, 49, founded and ran software companies in Silicon Valley before deciding to run for office. After losing an Assembly race in 2004, he bounced back to defeat former Lieutenant Gov. Cruz Bustamante for the insurance post in November.

But Poizner, who refused to take campaign contributions from insurance companies, maintained last week he would not be a pushover for the insurance industry.

He said he intended to uphold regulations promulgated by Garamendi over insurer opposition, including those mandating that auto insurers base premiums on driving and safety records, not place of residence. Those regulations must be completely implemented by mid-2008.

“I do believe that a person’s auto insurance rates should be based primarily on their driving record and I intend to complete the rollout of these important regulations,” Poizner told the Business Journal last week.

That stance, and his refusal to take insurer campaign donations, won Poizner the endorsement of consumer advocate Harvey Rosenfield, the author of the successful 1988 initiative requiring auto insurers to base their rates primarily on driving records, but which was only partially implemented.

Poizner reiterated his campaign stance last week.

“Absolutely, yes, insurance companies will get a fair shake with my office,’ he said. “(But) I will remain fiercely independent of the insurance industry. I will continue to speak out against practices that harm consumers.”

Suppressing rates?

Indeed, Poizner will likely be hearing quite soon from insurance industry representatives, and not just on the auto issue. Personal property/casualty insurers want to get his ear on reconsidering another set of regulations enacted by Garamendi in the days just before he left office.

Those rules prevent insurers from considering certain types of prior claims (such as weather-related claims) when calculating annual homeowners’ insurance premiums. They were part of a larger set of proposed reforms that Garamendi had billed as the “Homeowners’ Bill of Rights.”

“This would suppress rates for some homeowners, but the rest of homeowners with insurance will have to subsidize this. This is an opportunity for Mr. Poizner to show whether he believes in market rates or politically suppressed rates,” said Rex Frazier, president of the Personal Insurance Federation of California, which represents the major property and casualty insurers in the state, including Woodland Hills-based 21st Century Insurance Co.

Frazier said an even bigger issue looms for Poizner in the next few months: deciding whether to accept broad criteria adopted by Garamendi to calculate rates for all lines of property and casualty insurance. The industry believes the formula used by Garamendi generates rates that are inadequate to cover costs.

“We would like Poizner to change these regulations. Otherwise, it could drive capital out of California. At the very least, companies won’t be willing to adjust their rates up or down as often,” Frazier said.

The back-and-forth wrangling is all part of a long-running battle between insurers and former commissioner (now Lieutenant Governor) Garamendi over rates and whether insurers are reaping excessive profits as consumer advocates like Rosenfield have long maintained.

Garamendi’s office last year produced a report showing that several property and casualty insurers kept more than 60 percent of premium dollars after claims payouts were factored in; he frequently cited that report in trying to jawbone insurers into lowering their rates.

Indeed, last month, State Farm announced it was lowering its residential insurance rates an average of 20 percent, twice as much as the company initially indicated in September. Garamendi used the announcement to claim a victory in his battle against the insurers.

But Northbrook, Ill.-based Allstate Insurance Co. Inc. is proceeding with a proposed rate increase, which will be one of Poizner’s first tests as commissioner. Poizner said last week he was “concerned about the high cost of property and casualty insurance in some areas.” But he wouldn’t go any further, saying he was “still looking at the economics of the industry.”

While insurance companies will be pressuring Poizner to bend on this point, consumer advocates want him to hold the line.

“This is an industry that believes they should be able to charge whatever they want. But the voters in 1988 said ‘No’ to this,” said Doug Heller, executive director of the Foundation for Taxpayer and Consumer Rights, the organization founded by Rosenfield. “Poizner will have to hold the line on these policyholder protections.”

Policy changes

On a broader scale, Poizner said he will try to promote more competition in the state’s insurance markets.

“I do have a perspective on how important it is to develop an environment that encourages competition among insurance companies,” he said. “It is good for the insurance industry and good for consumers to have a lot more companies offering a lot more products.”

Poizner also indicated that he favors some “tweaks” to the state’s workers’ compensation system. As costs for most employers have plummeted following two rounds of reform earlier this decade, labor and attorney groups have argued that the reforms have gone too far, preventing legitimately injured workers from receiving treatment.

“I’m looking for ways to tailor and tweak the reforms to make sure injured workers get the medical treatment they need as fast as possible to return to work,” he said.

However, Poizner has little power beyond his regulatory authority to make major policy changes. That requires the cooperation of the Legislature and Gov. Arnold Schwarzenegger, who must sign off on any legislation.

And last year, consumer critics took the governor to task for siding with the insurance industry on a multitude of issues, something they say is at least partly the result of having former insurance industry officials in his administration.

Dan Dunmoyer, the former president of the Personal Insurance Federation, is the governor’s deputy chief of staff for policy, and former State Farm official Kathleen Webb is the governor’s insurance advisor.

At least one longtime local insurance executive, though, doesn’t necessarily worry about Poizner and his platform.

“I don’t have any issues that I want him to consider at this point, just that he does a good job and appoints quality people around him to help him do that good job,” said Stanley Zax, chairman of Woodland Hills-based Zenith National Insurance Co. “My view is that he’s a very smart, successful businessman who wants to do a good job.”