Insurance czar’s cheap political ploy
One of the best ways to evaluate the merits of any politicians’ proposed new rule or power grab is to first consider whether it’s something you would support if your political foes were in power. Unfortunately, Republican Insurance Commissioner Steve Poizner apparently hasn’t employed that (or any other) common-sense test to a new commission policy he announced on Wednesday.
In a transparently political attempt to rally the conservative base for his Republican gubernatorial run, Poizner released a list of 50 bad companies “doing business in the Iranian oil and natural gas, nuclear and defense sectors and announced that as of March 31, 2010, no investments that an insurer holds in any of those companies will be recognized on its financial statements in California.”
He stepped back a bit from his previous plans. Poizner was going to use his powers as the insurance czar to push insurance companies that operate in our state to divest of any stock in multinational companies that do business in Iran. It’s already illegal for a company to invest directly in Iran and other countries the U.S. government brands as state sponsors of terrorism, but there is no law against owning stock in companies —- such as the French petroleum company, Total —- that have some operation in Iran. Poizner is trying to close that loophole, according to published reports.
There is a question over whether he had the authority to push for divestiture.
But insurance commissioners have some power in overseeing insurance investments under the theory that regulators need to ensure that insurance companies are well funded and solvent so that they can pay claims for the insurance that they have underwritten. In California’s Soviet-esque insurance world, regulators have far more to say about rates than the marketplace. It’s not uncommon for government officials to flex their power and use the regulatory truncheon for political purposes.
“The regime in Iran is attempting to dominate the region and is a huge national security threat to this country,” Poizner said at a press conference last month, according to a Los Angeles Times report. “It is very important for anyone in a position like I am to look for a way to put maximum financial pressure on Iran.”
It’s pretty bizarre for a lowly insurance commissioner based in Sacramento to try to influence foreign policy, but Poizner is running for governor and has moved to the right to appeal to Republican base voters. This has led to his embrace of some great positions (low taxes, pension reform) and some weird ones, such as this Iran nonsense. He looks tough on terrorism as he advances a meaningless policy that nonetheless sets a bad precedent.
If Poizner succeeds in punishing law-abiding insurance companies that have some small portion of stock in companies that have some small operation in Iran, then who will the next commissioner decide to punish?
It’s highly likely that the next insurance commissioner will be a liberal Democrat, given the realities of California politics.
“What’s to say the next commissioner won’t say, ‘I don’t want you to invest in companies that aren’t green?'” said Steve Suchil, an assistant vice president with the American Insurance Association in Sacramento.
Writes National Review’s Maggie Gallagher: “And what will happen when the Son of Jerry Brown or Nancy Pelosi occupies the post of California insurance commissioner? Will businesses that do business with the Catholic Church or the LDS church take a hit for cooperating with ‘discriminators’? Could Israel, itself already the target of divestment campaigns in Europe, become the new South Africa in the minds of San Francisco liberals?”
Ironically, Democratic attorney general and likely gubernatorial candidate Jerry Brown is already championing the Iran divestiture issue with regard to California public pension plans.
None of these insurance companies are breaking the law. The federal government has authority to crack down on overseas investments and insurers rightly question whether Poizner has the authority to take action with regard to these secondary investments.
While his new and slightly improved position doesn’t demand divestiture, it is disingenuous.
“The deteriorating situation in Iran only underscores the need to take action to ensure that insurance company portfolios are not at risk from Iran-related holdings,” Poizner said in a Department of Insurance statement.
His argument is that because the commission is charged with assuring that insurance companies are financially stable that not allowing them to include Iran-related investments in their portfolio is a form of public protection.
But we’re talking about tiny sums here that won’t make a difference. This is symbolism and cheap political theater —- an attempt to stir up “War on Terror” sentiment among Republican primary voters. It’s rather shameless and is bad policy to boot —- free-marketers have long argued that trade and investment are the best tools to push a country away from authoritarianism rather than divestiture and sanctions, which only empower the dictators and stir up resentment.
So why are insurers worried about a policy that, in the end, amounts to symbolism? Part of it is the unfair black eye responsible insurers will get for simply having a little stock in major respectable companies that have some limited engagement in Iran. But the big issue, again, is precedent. They can look down the road and see what some left-wing demagogue will do in the insurance czar’s office. So a conservative will pave the way for more liberalism.
But there’s a final irony. Poizner recently told the Associated Press that the insurance commissioner position is too politicized and should perhaps be an appointed position. His Iran-related actions certainly confirm that point.