By Carla Marinucci and Jeremy B. White, POLITICO
July 29, 2019
SAN FRANCISCO — Embattled state Insurance Commissioner Ricardo Lara last week assured a convention of insurance executives that he would “start engaging the industry like never before” on issues that include giving insurers more access to drivers’ vehicle data — an effort long opposed by consumer advocates as a privacy invasion.
“I’m ready to get creative, just like all of you have been for so many years — and now you have somebody who’s receptive to that in the department,’’ Lara said, according to video taken by an attendee and provided to POLITICO of his address to the Western Regional General Counsel Conference, a meeting of 200 top insurance industry attorneys.
The address came as Lara remains under intense fire for being too cozy with the industry he’s charged with regulating in the nation’s largest insurance market. Reports show that the Democrat has accepted hefty industry contributions despite pledging not to, intervened in several judicial decisions in favor of insurance companies linked to donors and met with a major insurance excutive with business before him, possibly in violation of state law. To date, Lara has refused requests to make his calendars public on those matters.
Lara addressed the meeting, known as the American Property Casualty Insurance Association/Association of California Insurance Companies General Counsel Conference, last Thursday at the Loews hotel in Hollywood. The cost of sponsorship for what is described as a “premier industry event” tops out at the Titanium level of $13,000.
Neither of Lara’s two immediate predecessors, Democrat Dave Jones and Republican Steve Poizner, attended the private insurance lawyers’ convention, believing it to be an inappropriate venue for an elected official overseeing their industry, according to one former staffer who declined to be named for publication.
Lara’s office did not announce his speech to the private industry group or list it on his official web page.
Jessica Levinson, former president of the Los Angeles Ethics Commmission and a professor who teaches politics and ethics at Loyola Law School in Los Angeles, said of Lara’s speech to the insurance group, “The optics are so terrible even if you put on rose-colored glasses, it looks like a bomb went off.’’
“Any of these instances are damaging — but all of it together tells a story of someone who’s either inexperienced, inappropriate — or inept,’’ said Levinson, who warned that the recent parade of headlines is creating a damaging picture.
Lara, in his 50-minute presentation and question-and-answer session, assured top industry lawyers he’s open to revising what he called the current “antiquated” system of how auto insurance rates are calculated under California’s Prop. 103.
“I look forward to working with you as we work towards modernizing California’s automobile rating factors,’’ he said. “You can agree that is a major shift — and a way we can start engaging the industry like we have never before.”
Currently, under Prop. 103, the landmark 1988 consumer ballot measure that helped create the Department of Insurance, records including moving violations, self-reported miles driven and years of experience represent a major factor in defining Californians’ car insurance rates.
The insurance industry for years has pushed to use vehicle computer data, known as telematics, to set rates. That would allow insurers to monitor drivers’ acceleration, braking and turning habits, for example.
Consumer advocates have opposed such efforts, saying that the practice would open Californians to a whole range of privacy risks. Vehicle computers have grown sophisticated over time and can show exactly where and when cars have traveled when combined with GPS.
The insurance commissioner said he believed data use to calculate rates “is a fertile field for potential growth” and may be “something that can save lives.”
“Obviously, I think, if you know that somebody is ... monitoring the way you’re braking or how you’re driving ... you better believe that’s going to change your driving behavior,’’ he told the attorneys.
He added: “I’m excited about the prospects of breathing new life into the way we use rating factors in California.”
At the meeting, Lara also informed insurance executives that his staff was preparing to meet today “with insurers, including some of your members,’’ to explore how the industry may use technology to improve rating criteria while ensuring “adequate consumer protections.”
But the insurance commissioner appeared flummoxed when an insurance representative asked him for possible impacts of the California Consumer Privacy Act — widely considered the strongest consumer data privacy law in the nation.
“My general counsel is here ... " he told them to laughs. “We’re doing a couple of briefings. I’ll get back to you when I can talk about this issue.”
In a statement provided by his office after publication, Lara said his job is to "meet with insurers, consumers, legislators, local government leaders, and all those affected by the industry."
He reiterated his willingness to consider allowing insurers to use driver data, stating that "I want your auto premiums to be based on how you drive, not where you live or who you are."
"The proper use of telematics could have the potential to enhance driver safety and control premiums, and we will be engaging consumer groups and privacy experts to protect Californians’ data," he added.
Jamie Court — who heads Consumer Watchdog, the consumer advocacy group founded by Harvey Rosenfeld, who crafted Prop. 103 — reacted with alarm to Lara’s remarks.
“It’s shameful that the commissioner would so be blatantly solicitous of the insurance industry — but also that he is so blind to the danger that insurance company surveillance of our cars’ every movements poses for our privacy,’’ Court said.
“Data about how fast and where we drive is a valuable commodity that insurance companies will exploit for their financial gain if Mr. Lara lets them,’’ Court said. “The only thing worse than having Big Brother riding in your car is when Big Brother is the insurance industry. “
Amy Bach, who heads United Policyholders, a nonprofit consumer protection group, said Lara deserves credit for being eager to hear concerns and issues from consumer groups as well — and noted he’s slated to speak before her organization next month at a fundraiser.
Still, she also said his remarks could be construed as overly friendly to the industry.
“The [California Dept. of Insurance] isn’t there to help insurance companies, they are there to regulate the marketplace and keep it healthy,’’ she said. “So it’s really important that the department’’ be viewed as impartial, she said. “They’re supposed to be an agency that keeps the industry honest and protects consumers.”
One former top elected official, speaking on condition of anonymity, called Lara’s actions shocking.
“To parachute in behind closed doors to an industry event, and essentially say, ‘You have a receptive insurance commissioner’... while sending signals that ‘I’m on your side’ ... that’s really inappropriate.’’
In the same week Lara spoke to the insurance attorneys in Hollywood, he was excoriated by the Los Angeles Times editorial board for other actions that included meeting with the executives of one of the firms with a case pending before him — an action that may have violated the law. Recent editorials in The Sacramento Bee have slammed the commissioner’s behavior as “shady and suspicious.”
After revelations that he accepted more than $54,000 in insurance industry donations — which Lara pledged never to take during his campaign — Lara said the contributions were the result of an “honest mistake” because he acted as the treasurer of his own campaign committee. Spokesperson Michael Soller told POLITICO he has returned those checks.
In addition to the donations from insurance industry figures that Lara has pledged to return, his 2018 campaign accepted thousands of dollars from insurance industry organizations and law firms with insurance-related practices and their employees.
Political action committees representing insurance agents gave to Lara, as did firms like First American Title Insurance Company and Aflac, Inc. Money flowed from out-of-state companies tied to the insurance industry, as with thousands of dollars from a West Palm Beach, Fla.-based firm that touts its connections to former insurance industry regulators.
Automobile industry groups with a stake in vehicle insurance issues also contributed money to Lara. Beyond organizations with a business interest in Department of Insurance decisions, Lara benefited from the support of the California Democratic Party, current and former lawmakers and powerful organized labor groups.
Insurance money also flowed to the benefit of Lara’s 2018 opponent, former insurance commissioner Steve Poizner, whose campaign was buoyed by a business-funded PAC that received tens of thousands of dollars from insurance organizations.
Levinson said that the stakes are so high for consumers and the state on the issue of insurance, that the commissioner must be above reproach.
“This is part of what happens when you have no qualifications for the statewide office,’’ said Levinson. “And this is a job where it’s a really important one — in the sense that you have a quasi-judicial function and that means that in a way, certain ethical considerations are heightened.”