In 1994, I was elected by the people of California to the 
critical position of Insurance Commissioner.  This is a powerful office
whose function is to regulate the entire insurance industry of the
state, ensuring that companies have the money to pay claims and that 
policy holders are treated fairly.  I was able to appoint six deputy 
Commissioners to assist me in leading the 1,100 Department of Insurance
 employees.
	Attaining this high office gave me the golden opportunity to 
implement free market principles, in which I so fervently believed, in 
the regulation of a very troubled market.  Burdened with a bewildering
array of contradictory regulations, politically vilified, and battered 
by losses from a devastating earthquake, the insurance market was not 
functioning efficiently for consumers.  Prices were high, new 
homeowners’ insurance was becoming hard to find, and many companies 
were developing plans to either reduce their book of business in the 
state or leave.  This was an intolerable situation and it demanded 
radical action by the Insurance Commissioner.
	I quickly instituted a review and rewrite of many regulations 
that had caused problems.  The goal was to ensure clarity and 
compliance with the intentions of the rules.  Key to this effort was 
implementing a free market approach to rate setting, allowing companies 
maximum discretion to enter different product lines and aggressively 
pursue market share.
 

 






	The next monumental effort was to solve the growing crisis in 
homeowners’ insurance availability.  The dangerous overexposure of 
insurance companies was a threat to a smoothly functioning economy in 
California.  Scarce and expensive insurance coverage was becoming a 
drag on the real estate market and policy holders were taking an 
increasingly painful hit in the pocketbook.  The creation of the 
California Earthquake Authority, initially a $10 billion quasi-public 
insurance entity, instantly solved the problem by shouldering most of 
the exposure to the earthquake hazard.
	In 1996 I drafted, and campaigned for, Proposition 213, a state 
wide initiative that restricted the rights of drunk drivers and the 
uninsured to sue.  The measure passed overwhelmingly and had an 
immediate impact on insurance rates, dropping them 15-25%.
	A terrible injustice was brought to my attention in 1998.  Many 
survivors of the Nazi Holocaust had not been paid by European insurance 
companies for their losses during that period.  Most survivors lacked 
documentation of their claims and European insurers had not been 
helpful in researching the issue.  Working with my fellow Insurance 
Commissioners from across the country, I helped set up the 
International Commission for Holocaust Insurance Claims and personally 
recruited Larry Eagleburger, the former US Secretary of State , to 
chair the organization.	The organization works with Holocaust insurance 
claimants and  European insurance companies to facilitate the payment 
of legal claims.
	In 1999, sparked by continuing complaints from dissatisfied 
policy holders, the Department completed a market conduct survey of 
several insurance companies that experienced massive claims from the 
Northridge earthquake of 1994.  These examinations consist of auditing 
a small number of claims and determining if the companies have complied
with claims handling regulations.  Initial findings by our examination
teams raised questions about the level of compliance.  Companies 
strongly disputed any negative implications and pointed to the near 
chaos in the immediate aftermath of the quake, as claims adjustors, 
unfamiliar with earthquake damage, were flown in from outside 
California.  The sheer number of claims appear to have overwhelmed the 
systems of many companies.  Many claims were opened, settled, and 
reopened after new damage was found.  Despite all the confusion, 
however, there was only a small handful of claims that remained in 
dispute by the end of 1999.  
	After reviewing the responses of the examined companies and 
surveying the current state of the marketplace, I determined that 
pursuing a major enforcement action against companies that held the 
vast majority of market share in the state would not be in the 
interests of policy holders.  Traditionally, all state agencies have a 
preference to settle regulatory disputes with their regulated entities.
Compliance with regulations is often in the eye of the beholder and a 
long, tedious, and expensive administrative hearing process is the only 
recourse a state agency has to compel action and strict rules of 
evidence apply in those proceedings.  The Department decided to 
aggressively press for a settlement that would most immediately benefit 
policy holders who might feel that they had been somehow slighted in 
the claims handling process immediately following the Northridge 
earthquake.
	At my direction, Department staff put together a memo that laid
out the maximum exposure to a fine to which a company could be exposed. 
This was done by making an assumption that every alleged issue of non 
compliance that was uncovered in the tiny number of examined files 
would be replicated in every claims file from the quake.  It was then 
assumed that each act was deliberate, exposing the company to a $10,000
fine for each incident.  The total amount of these possible fines was 
staggering, running into the billions of dollars and all of us knew 
that the hearing process would never come to these kinds of 
conclusions.  However, presenting the specter of these massive 
potential fines to the companies was the first step in convincing them 
of the wisdom of settling with the Department.
	The negotiations dragged on for months until we got what we 
wanted.  The companies, in a massive concession, agreed to contact each
Northridge claimant and offer to reopen the earthquake claim and 
readjust the claim.  This was unprecedented  in that the statute of 
limitations had already run on all Northridge claims.  The legal 
position of the companies was strong and they could have easily ignored
our demands on this issue.
	At the same time these negotiations were proceeding, I was also
hard at work reaching out to underserved communities in California 
where vital insurance products were not available.  This chronic 
problem had contributed to a stubbornly high rate of illegal uninsured 
motorists in the state that had unfairly shifted the insurance burden 
to other segments of the population.  We assumed that working with 
recognized leaders from these communities would give us the best chance
to reach and educate those citizens who were not adequately insured.  
Department attorneys had set up two charitable foundations to 
facilitate working with on these goals and a Deputy Commissioner was 
designated to be the Department liaison to the Boards of Directors of 
these entities.
	It seemed to be an excellent idea at the time that the 
companies involved in these negotiations, in lieu of admitting 
wrongdoing and paying fines, pay an amount into foundations that were 
charged with conducting earthquake research activities as well as 
outreach to underserved communities.  This sort of arrangement  had 
precedent in California enforcement actions and had recently been 
utilized by the State Attorney General in an anti-trust action against 
Levi Strauss and Nine West.  In that case, the Attorney General 
directed that $2.9 million from those companies be directed to 
charitable organizations involved in researching women’s health issues.
Approximately $12 million dollars was collected from insurance 
companies and deposited in the foundations.  It was decided that, as 
Insurance Commissioner, it would be best if I was not involved with the
deliberations of these Boards as they fulfilled their purposes. 
	The foundations elected to spend a large amount of money on 
television advertisements promoting earthquake education that featured 
me and Los Angeles Laker Shaquille O’Neill.  These educational messages 
were in fulfillment of my statutory requirement to promote insurance 
education of Californians.   A significant amount of money was 
contributed to various community groups involved in charitable 
activities such as the Urban League, and 100 Black Men of the Bay Area.
	Unfortunately, the Deputy Commissioner who was supposed to 
monitor the foundations engineered a scheme where he was able to siphon 
away money for himself.  As evidence of wrongdoing on his part 
surfaced, he resigned from his position and eventually pled guilty to 
federal charges.
	Rumors of  irregularities in the handling of money at these 
foundations quickly drew the attention of the press and the Democrat 
controlled Legislature.  Seeing a golden opportunity to weaken one of 
only two statewide Republican office holders, hearings into the 
activities of the Department were held and we were dragged through 
months of grilling on the intimate details of how we put the 
settlements together.  The press swirled with lurid allegations and the
partisan rhetoric was red hot. Understanding the true political 
motivations of what was happening, we patiently tried to explain our 
reasoning and the legal basis for our actions, but it was to no avail.
	The press wasn’t listening and the Democrat leadership, having 
cowed my Republican allies into silence, sensed they could destroy me 
as a political force.
	Finally, in late June 2000, I made the painful decision to 
resign as Insurance Commissioner.  It had become impossible to function 
in the job and the role of the Department of Insurance was too vital to 
long exist under the political cloud that had been created over my 
head.  
	In February 2002, a vigorous examination by the authorities was 
publicly ended without finding any wrongdoing on my part.  Recently,
the settlements were upheld as legal and equitable by the California 
Courts and all litigation against me ginned up by my trial lawyer 
opponents has been summarily dismissed.  Exactly as intended, the 
settlements have resulted in hundreds of millions of dollars in 
additional money going to Northridge earthquake claimants.