The recent dust-up between Insurance Commissioner Steve Poizner and former Insurance Commissioner John Garamendi certainly made for great political theater.

The nasty exchange of letters featured in FlashReport was priceless and certainly marks an early skirmish in a potential 2010 Governor’s race square-off between the two statewide officeholders (with due deference to the Attorney General and to the CEO of E-Bay).

The lesson learned for Poizner is that sometimes important decisions are going to bring loud criticism.  But if you stand on principle and stand your ground – as he did — then you will come out the winner.  In fact, I have had numerous opportunities to praise Poizner for standing tall, most recently for his leadership in the defeat of Proposition 93 to weaken legislative term limits.

Poizner should not have been surprised by the criticism that came his way.  It came quick and furious from the typical front groups for trial lawyers that always have a gripe to air, as well as Garamendi who has always been willing to add his rantings in support of those groups’ self-serving and misguided agenda.

The Commissioner did not seek the easy path where he would get the least criticism or no public criticism at all.  That’s not always easy to do in the crucible of California politics.

Rather, he exhibited welcome leadership to make the decision he thought was best, despite well knowing that there would be an outcry.

The issue at hand was one most would view as relatively minor and technical.  It has to do with price controls on insurance rates, and the ability of insurers to have a little more flexibility in the way insurance rates are set.

Poizner claims in every speech and conversation his strong support of a free-market.  However, I have to admit that in some regards that it has required a lot of patience to wait for the thoughtful and cautious Poizner to “find his sea legs” and actually start to undo the damage done by his predecessor.

With this decision to modify Garamendi’s price control regulations, he starts down a path to really distinguish himself from Garamendi, who is an avowed anti-market liberal who detests the insurance industry as passionately as he loves any chance to gain a little media attention.

With this decision, we have clear evidence of Commissioner Poizner’s actions backing up his words as a proponent of smart regulation.  Sure, the recent changes are small and leave in place highly restrictive price controls – but it is progress that shows he is growing in his Commissioner’s role, more confident and determined by the day.

That certainly makes my Republican heart glad.  If he can endure this round of criticism and stick to his guns, should he ever be elected Governor he will have endured enough flak to have learned to endure criticisms and monumental pressures from the big-moneyed and powerful union interests that he will have to deal with daily.

The key now will be to watch how aggressive and adamant Poizner will be in ensuring that the California Department of Insurance bureaucrats respond to his decision in the best manner.  The real impact of the decision will be to see how it really plays out in the market place, which is dictated by whether Poizner’s bureaucrats water down the recent changes during the implementation phase.

More important, it will be interesting to watch whether Poizner sees this as we do, a first step in a process. 

More change to allow greater flexibility certainly would be in order – especially if you ask a Republican free-market champion like me who wants to see my insurance rates go lower because companies have the flexibility to compete vigorously in the market!

Poizner really should take this decision even further and allow more flexibility in line with the free-market philosophy that the Commissioner espoused in a conversation that I had with him on Tuesday evening…

“Competition is the best regulator,” Poizner told me as we discussed these changes he is making, and his letter exchange with Garamendi. “I am opposed to a one-size-fits-all approach, and want freedom and flexibility in these regulations.”

Poizner told me that his focus is on consumers, and on consumer choice.  He said that when there is lack of competition in the marketplace, that it limits consumer choice, and drives up insurance premiums.  Poizner used as an example the terrible situation that had arisen in the Workers Comp market, with over 50% of policies being issued by the state fund because so many private companies had literally left the market.  Now, with reforms in place, Poizner says that many firms have come back, and that rates have dropped considerably.

Price controls by government, generally, are a bad thing.  However, at least Poizner is making progress to inject business reality into these controls – a step that all of us should cheer.  And more steps toward an insurance market with fewer price controls would usher in a new era of price competition to benefit every California insurance policyholder.

We all know Poizner is setting up a run for higher office in 2010, and I am pleased to see him stand up and be a leader – refusing to back down to bullies.

To the Commissioner I say:  Let the trial lawyers scream as long as they want – tune them out/..  If you stand on principle and do what you believe in, then you will keep on a course true to your core and signal to people that you can be taken at your word. 

Further, you will give others (like me and FlashReport readers) real actions as Commissioner upon which to judge your leadership and your decision-making mettle as you consider a run for higher office.

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This entry was posted on Thursday, May 29th, 2008 at 12:00 am and is filed under Blog Posts.