California’s Insurance Commissioner Race Is the Most Important Election You’ve Never Heard About: New at Reason

Some of the most heated races in the November election are for offices that most Californians know little about. Ask an average voter about the Orwellian-sounding Bureau of Equalization (BOE), and they’ll look at you with an eyes-glazed-over stare reminiscent of a cat’s gaze after you ask whether it prefers tuna or turkey giblets. Likewise, how many voters can tell you why the race for insurance commissioner is so important?

The BOE races don’t really matter. The tax board used to be fairly important, but the Legislature recently stripped it of most of its powers. Those elections mainly are about who gets a sinecure while they contemplate other offices. But the election of insurance “czar,” as some rightly call it given the vast powers held by the head honcho at the Department of Insurance, holds real significance given its impact on insurance markets and the cost of your premiums.

This convoluted system goes back to 1988, when voters approved Proposition 103. As the Department of Insurance explains, the initiative capped rates and “requires the ‘prior approval’ of California’s Department of Insurance before insurance companies can implement property and casualty insurance rates. Prior to Proposition 103, automobile, property and casualty insurance rates were set by insurance companies without approval by the insurance commissioner.”

In our market economy, companies offer products at different prices and the buyer chooses. Prices are kept in line thanks to competition. There’s a legitimate role for regulation, mainly to make sure the businesses live up to their promises. That traditionally is the main role of state insurance commissions. They need to assure that insurance companies have the financial resources to pay out the coverages in the event of disaster. But voters instead implemented a government-controlled rate system.

This year, the choice of commissioner is fascinating. Both candidates are highly accomplished, which offers a clue that this is not a placeholder job, writes Steven Greenhut.

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