Poizner’s operation of Insurance Department a factor in California governor’s race [The Sacramento Bee, Calif.]

Jan. 24--When Steve Poizner became the state's insurance commissioner in 2007, he brought with him years of engineering and business experience -- but virtually no knowledge of insurance.

Poizner stepped up to the challenge like the engineer he is, immersing himself in the minutiae of one of the most complicated regulatory fields around, according to staff members and others who observed Poizner's tenure.

The former Silicon Valley CEO grilled his staff about insurance laws and toiled to master arcane details about rate formulas and legal mandates.

Yet Poizner also appeared to see the job principally as a warmup for his current campaign for the Republican nomination for governor, said Amy Bach, executive director of the consumer advocacy group United Policyholders. His interest in maintaining support from insurance companies made him more likely to negotiate with than to sue the firms he regulated, Bach said.

Even Poizner's critics, however, credit him with significant accomplishments, including winning more generous compensation for homeowners from the insurance giant AIG after the Sayre fire destroyed nearly 500 homes in the Sylmar neighborhood of Los Angeles in 2008.

"On balance, he's been much, much better than we thought he'd do," Bach said. "But his political aspirations and his political views have held him back in being as good a regulator as he could have been."

Poizner's office responded that the commissioner's more negotiation-focused approach won results for policyholders. His predecessor, John Garamendi, had taken a more confrontational tack with insurance companies.

"Poizner found a way to work with the industry to get things done," said Byron Tucker, communications chief under both Poizner and Garamendi. "And his approach often led to results that we could not achieve via regulation.

"He's talked insurers into doing the right thing as opposed to trying to force it upon them."

Since declaring his intention to run for governor in September 2008, Poizner has painted himself as a reformer who cut his department's budget and staff numbers even before the fiscal crisis forced the state to do the same across the board.

As one of his first actions, Poizner contracted with the firm MGT of America to review the organization and look for efficiencies. The process took about a year to complete, during which time the department's expenditures grew from $210.5 million in the 2007-2008 budget year to $216.4 million in 2008-2009.

The department's budget fell to $211.1 million this year, around the time the suggested changes were implemented, Poizner said. The changes included merging offices, eliminating some vacant positions and developing a "common data architecture." The department's budget comes entirely from fees paid by insurers.

"We found some opportunities for improvements and some areas where they could shift some employees around to gain efficiencies," said Tyler Covey, the MGT partner in charge of the review.

Poizner now proposes a similar top-down review for all of state government -- about five years after Gov. Arnold Schwarzenegger conducted his own study, the California Performance Review, which was largely never implemented.

Poizner's rival for the Republican nomination, Meg Whitman, also has proposed cutting expenditures by eliminating "fraud, waste and abuse."

"It's all been thoughtful, carefully implemented over the course of my term so far," Poizner said about his department's review. "We're being careful about it. Next time I do it, I'll do it even faster."

Consumer advocates such as Bach and Harvey Rosenfield, founder of Consumer Watchdog, said that while cutting employee numbers made for good Republican politics, it hampered a department that was already short-staffed.

"The changes that were made made it harder for the Insurance Department staff to do their jobs," Rosenfield said, and "undermined the uniformity, consistency and stability of the regulatory process, and led to higher premiums."

Poizner's chief deputy, Jesse Huff, said the review streamlined the department without affecting performance.

"We were looking at finding ways to be more efficient before the state as a whole was forced by economic circumstances into such a mode," Huff said.

Rosenfield also slams Poizner for tinkering with provisions of voter-approved Proposition 103, which restricted how insurers could set rates.

Rosenfield, the law's author and a potential candidate for commissioner, had endorsed Poizner's candidacy in 2006 but later accused him of going back on pledges not to touch the law.

"He ended up causing rates to go up instead of going down or, in some cases, they didn't go down far enough," Rosenfield said.

Woody Girion, a deputy insurance commissioner, said Poizner's changes principally allowed the department to study a longer period of economic trends, suggested by insurers, so that it could more accurately set rates. The department estimates its policies have saved consumers $1.8 billion.

"Quantifying and qualifying all variances, we were able to make a determination about whether companies should get rate increases, rate decreases or leave it as it is," Girion said. "We challenge it. We verify it. In many, many cases, we force rates down."

What few dispute about Poizner is his willingness to dive into the details and, in the Sayre fire case, get personally involved in helping victims win compensation.

Los Angeles County Supervisor Zev Yaroslavsky remembered how Poizner put himself in a situation many politicians would have stayed far away from: a January 2009 meeting with 400 angry fire victims who hadn't been making progress with their insurers.

"Nine times out of 10, when you have 400 aggrieved people and a public official calls a meeting, it's not going to be a good meeting for the public official," said Yaroslavsky, a Democrat. "He put himself out there. Nobody would have faulted him for not having a community meeting there."

Poizner's intervention, which included bringing insurance company representatives to the meeting, ended up helping victims such as Joanne Nadeau win more relief than their insurers were initially offering.

"He just attended these meetings," Nadeau said, "and was very upset about how we'd just been tossed around."

Echoing the words of Insurance Department staff members, Yaroslavksy said Poizner approached the Sayre disaster in his usual way -- by zeroing in on the details and giving himself a crash course in the issues involved. That included talking personally to everyone from local governments to victims to insurers.

"I would say he's hands-on, but he doesn't get drowned in the detail," Yaroslavsky said. "He finds an equation to get to the solution."

Some critics say Steve Poizner, a candidate for governor, viewed his job as insurance commissioner as a steppingstone, making him too easy on insurers. But even some critics applaud his accomplishments in the job.

Call Jack Chang, Bee Capitol Bureau, (916) 326-5543.

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