California's Pied Piper Insurance Commissioner and the Pandering Press

PasadenaPundit ^ | April 25,2005 | Wayne Lusvardi

[WayneLusvardi]

California's Pied Piper Insurance Commissioner and the Pandering Press Written by Wayne Lusvardi Monday April 25, 2005

"Look at the front page of any daily newspaper in any town in America. What do you see? Invariably there will be a story or two about some victim group or person who is being helped by some government program...Newspaper reporters have always covered the public sector. But while they used to be a preventative to corruption and abuse of power, they now cover it as a partner in the effort to get government more involved in people's lives. Implicit in government coverage these days are that non-defense government programs are good and the more people are attached to some government program the better society will be. Reporters and editors love these stories. They play into the standard journalism template that the private sector has questionable motives; i.e., profit, whereas the public sector's motives are pure, i.e., altruistic. Often ignored in reporting is the view that it's easy to be altruistic with other people's money that the government has at its disposal." Jon Ham, publisher Carolina Journal, "Papers' Love of Government Hurts Circulation"

Staff writer Dean Calbreath of the San Diego Union has a column in the April 22 issue "Defending Homeowner's Rights: State tries to combat cancellation of insurance policies" (see link at: http://www.signonsandiego.com/uniontrib/20050422/news_1b22insure.html). The storyline is about Dan and Christy Clancy, a married couple whose homeowner's insurance carrier threatened to double their premium or cancel their coverage after filing two claims over a 5-year period. The reporter finds it newsworthy to cover a visit to the Clancy's home by California Insurance Commissioner John Garamendi, a declared candidate for California Lieutenant Governor, who is using the Clancy's plight as a centerpiece to his campaign to mandate that insurance companies must tell insurance customers about any potential negative actions that may result from filing claims.

The story fits the successful newspaper journalistic template - little guy victimized by big corporation finds a champion in big government. No mention is made in this story that if insured homeowner's want deductibles to cover losses as low as $1,000, and file many small claims, they are going to have their insurance rates increased significantly or cancelled. It wouldn't surprise this writer if government hadn't mandated insurance companies to offer policies with such low deductibles. In the case of the Clancy's, it is reported that they suffered a $1,436 loss of entertainment equipment from their car after the valet had left their car door unlocked at a Palm Springs hotel. No mention is made of having the Clancy's insurance carrier filing a claim against the hotel's carrier for this loss. Nor is there any mention of whether the fine print in the Clancy's insurance policy already informed them of the prospect of increased premiums and cancellation. The lack of common sense in the reportage leads one to believe that this story lacks credibility altogether.

Neither is any mention made in this story that government intervention into the insurance industry is precisely what happened in Los Angeles after the 1994 Northridge earthquake. Liberal politicians got state regulators to intimidate insurance carriers to hand out overly liberal payouts in order to appease the electorate, which coincidentally resulted in a lot of insurance fraud. How can private insurance companies stay in business if government can coerce the amount of payouts to those suffering losses in order to appease their electorates and stay in political power? The result of the politicization of insurance is that now private insurance carriers no longer provide earthquake insurance in California. Earthquake insurance has now been taken over by the state, just as the state took over the energy business after the government-created California electricity crisis of 2001.

The above story reminds one of the children's folk tale of the Pied Piper of Hamlin written by the Brothers Grimm, made into a poem by Robert Browning and popularized in the lyrics of many modern songs. It tells the story of a man who came to a small German village claiming to be a rat catcher. The village people promised to pay him for killing the rats. So the man attracted the rats by playing music through a pipe and made the rats follow him to a river where they all drowned. Despite his success the people reneged on paying the rat-catcher. The rat catcher left the town but returned only to lure the children of the village into a cave where they died due to a cave-in. The moral of the story is to beware of people who entice people to follow, especially to their doom.

Politicians always want to make you believe that there is such a thing as a free lunch. And the public always wants public nuisances and uninsured property damage losses compensated without paying for them by shifting the cost to all taxpayers by some socialized system. And liberal government is always ready to be the insurer of last resort. Only in the case of earthquake insurance government is more than willing to be the insurer of first resort. And journalists want to frame such stories as defending "homeowner's rights" to insurance or some other government entitlement. As sociologist Herbert J. Gans writes in his book Deciding What's News, newspaper headlines and magazine covers "award power and prestige to the cover subject; they also legitimate the chosen person or topic, and indicate to observers of the American scene what is currently important..."

There is sometimes more truth in a children's fairy tale than in modern newspaper reporting. The moral of the modern day story of a pied piper insurance commissioner and an appeasing press is still applicable - beware of leaders who make irresponsible promises using seductive enticements, especially when they are running for office, and a press that only placates the public while opening themselves up to the criticism that they are merely serving as a de facto public relations agent for political candidates.