Quake Insurance Testimony Curbed

Insurance Commissioner Chuck Quackenbush hired a nationally known insurance industry critic to testify at public hearings on state earthquake insurance rates, but is now refusing to allow him to testify further.

Robert Hunter, a former Texas insurance commissioner and longtime consumer advocate, said in his testimony in May that homeowners were being charged 30% too much for their quake insurance and that the coverage was poor.

But when he sought to testify again, this time about what he regards as extraordinarily high expenses at the California Earthquake Authority, Quackenbush’s aides refused to let him.

Hunter, vacationing in Maine, could not be reached for comment. But people to whom he has spoken reported that he has written to Quackenbush several times demanding to know why he is being muzzled.

Meanwhile, the executive director of the Economic Empowerment Foundation, Selwyn Whitehead, an intervenor in the hearings, filed a motion last Friday with the hearing judge demanding that either the Department of Insurance produce Hunter or that he be subpoenaed.

Through a spokeswoman, Quackenbush denied Tuesday that he has received any letters from Hunter or that any word of Whitehead’s filing had yet reached his office.

Spokeswoman Dana Spurrier said Quackenbush feels Hunter’s role in the hearings is over.

“He hired Bob Hunter to do a job,� she said. “Bob Hunter filed his testimony. The job is complete. End of the story.�

The Hunter matter surfaced as the board of the Earthquake Authority gave its approval to rate decreases averaging 11%. The reductions had been recommended last week by the authority’s chief executive, Greg Butler.

The board voted 3 to 0 for the decreases, recognizing that a quake risk model prepared for the agency was faulty. The decreases will not be implemented for 90 days, but hundreds of thousands of policyholders who have paid or will pay under the old rates will be given a credit or a refund.

The only substantial change the board made from Butler’s recommendations was to rule out any increase in mobile home and condominium rates.

Bill Ahern, representing the Consumers Union in the rate hearings, said Tuesday that he and Hunter are concerned about two specific Earthquake Authority expenses.

Ahern said one is the 10% of all earthquake insurance premiums that are paid in commissions to insurance agents for selling such insurance. This is at least double what it should be, he said.

The other is the 4% of all California earthquake insurance premiums paid to private companies for handling sales of the quake insurance for the authority. Since the companies are selling regular homeowner policies at the same time, Ahern and Hunter feel this is far too much.

Another big Hunter concern is said to be the hundreds of millions of dollars the authority is paying for reinsurance to investor Warren Buffett and others.

Some critics have viewed this as a sweetheart deal, although reinsurance is a vital safeguard for adequate financial backing should a quake catastrophe occur early in the life of the state insurance system.

Whitehead said she is convinced that earthquake insurance could be sold at only half what is now being charged.

Legislative concern was reflected Tuesday in a statement by Assemblywoman Liz Figueroa (D-Fremont), head of the Assembly Insurance Committee.

“By trying to silence its own witness, the Department of Insurance appears to view this hearing as a game to be won, rather than as a forum to explore all the facts,� she said.

Many people were surprised that Hunter was hired to testify in the first place because his critical attitude toward the insurance industry is sharply at variance with Quackenbush’s usual pro-industry views.

But the hiring came at a time when Quackenbush was trying to prove his pro-consumer credentials in advance of his bid for reelection next year.