The Commissioner Conspiracy Theory By Robert Warne - June 4, 2003
Are Insurance Commissioner John Garamendi’s actions towards State Compensation Insurance Fund the precursor to the execution of a radical master plan?
There has been much talk about working things out and resolutions and solutions recently but it’s not so much what has been said, but the motivator behind the exchanges, that is so intriguing.
Consider the public dialog between Garamendi and State Fund in light of the pressure mounting for the governor, commissioner and legislature to fix California’s work comp crisis, and the following theory makes sense.
The basic plan rumored among insurance insiders is that Garamendi wants to arrange a marriage between State Fund and the California Insurance Guarantee Association (CIGA).
By doing this, State Fund’s $12 billion in assets could be used to cover CIGA’s current $3 billion in liabilities caused by the state’s menagerie of insolvencies.
It would only make sense that State Fund should pay for the insolvencies because they caused them by recklessly competing for business at lowball rates.
This may be all it takes to force State Fund to cough up some of its business for other carriers.
As twisted as this may all sound, if the political calculations are all in agreement, then such a plan may be well received, especially if it packaged in a way that gives off the impression that it will stabilize the work comp system.
Desperate times require desperate measures. In his latest statement on the matter Garamendi said he expected to resolve the State Fund reserve issued in June.
Whether he’s speaking in code or not, it won’t be long till we find out if this theory holds water and the commissioner moves forward with operation “arranged reserving”.
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