Affirmative action shakedown of CA insurance industry

July 24, 2012

By Katy Grimes

Despite the anti-affirmative action wave that has washed over America, affirmative action policies are thriving in government. Most people say they believe that no one in America should receive preference in education, jobs or government contracts because of their skin color or gender.

But that is exactly what is happening, and it occurs right under our noses.

California’s Insurance Commissioner Dave Jones has a plan in the works to require major California insurers to submit an annual report to him outlining how they plan to implement stepped-up efforts to increase procurement from women and minority business enterprises.

In order to guarantee that this plan becomes a state mandate, the Assembly Insurance Committee is pushing a bill to change the state Insurance Code, and make this diversity policy the law of the land.

It’s a form of cheating.

CA Insurance diversity task force

Jones ordered in January that an Insurance Diversity Task Force be created “to consider and make recommendations about diversity in the insurance industry, including the diversity of corporate governing boards and procurement from diverse businesses.”

“Insurance is a $125 billion industry in California,” said Jones in a news release. “I am hopeful this task force will help us identify, measure and increase what the insurance industry procures from California’s minority- and service-disabled veteran-owned businesses.”

I attended a meeting of the Diversity Task Force this week, and was startled to observe the depth of affirmative action policies in government, as well as the arrogance of state government in dictating terms to private sector businesses.

In January, Jones requested “voluntary supplier diversity data” from California’s top 200 insurance companies. But apparently that’s not enough.

The Assembly Insurance Committee Chairman, Assemblyman Jose Solorio, D-Santa Ana, clearly working in tandem with Jones, authored AB 53, which would require the insurance companies to report their diversity policies and plans to Insurance Commissioner Jones.

Using Soviet-style policy, this state agency is forcing private sector businesses to report who they are doing business with.

The next step undoubtedly will be the penalty phase for businesses which do not meet the state’s diversity criteria.

The task force meeting was held at the stunning offices of the Department of Insurance, located in Sacramento’s most prestigious downtown business address, 300 Capitol Mall.

 The meeting was attended by the task force members, a few insurance industry people, CA Department of Insurance employees, and me.

This appears to be a shakedown of the big insurance industry, and an attempt to push certain minority-owned businesses to the head of the line in supplier and procurement deals, violating the most fundamental concepts of supply and demand economics, and the free market.

“Expanding small businesses – especially diverse and disabled veteran-owned businesses – will help turn our economy around,” added Commissioner Jones.

On its website, the California Department of Insurance states, “The CDI ensures that consumers are protected; that the insurance marketplace is fostered to be vibrant and stable; that the regulatory process is maintained as open and equitable; and that the law is enforced fairly and impartially.”

While I am confident that the mission statement has been altered and updated over the years, the state insurance department seems to be manipulating the insurance market, as well as the state’s economy, and interfering with the ability of private business to operate in California.

Affirmative action policies

Affirmative action refers to policies that take factors including “race, color, religion, gender, sexual orientation, or national origin” into consideration in areas of employment, education, and business, usually justified as countering the effects of a history of discrimination. Proponents claim that minority groups are underrepresented in education and employment.

Many people believe that President Barack Obama was elected largely because Americans thought he would lead the nation to a an era of post-racialism. But after he took office, the post-racial president signed Executive Order 13583 “to promote Diversity and Inclusion in the Federal Workforce.”

However, it is ironic, because there are few institutions in America more ‘diverse’ and ‘inclusive’ than the government, and especially the federal government. The federal government reports a workforce of 17 percent black, while blacks are roughly 13 percent of the U.S. population.

Foes of Affirmative Action

Affirmative action foe Ward Connerly, and founder of the American Civil Rights Institute, helped lead the successful campaign for Proposition 209 in California. In a 54 percent to 45 percent vote, voters passed the law to eliminate affirmative action in public education, hiring and contracts in 1996. But California officials and lawmakers have ignored Prop 209, and instead continue to implement and use affirmative action policies throughout the education system, and all levels of government agencies.

“A policy that could be justified at its start, affirmative action has now become yesterday’s solution to yesterday’s problem,” Connerly said. “Yet it endures as if nothing has happened in the past 50 years.”

There isn’t a government agency that does not include an affirmative-action office or “diversity” department in its structure.

In addition to the president’s executive order, the Dodd-Frank financial-reform law included Section 342, promoted by Rep. Maxine Waters (D., Calif.), which Connerly said should be called the “White Male Exclusion Act.”

“It establishes in all federal financial regulatory agencies an “Office of Minority and Women Inclusion” with responsibility for “diversity in management, employment and business activities,” Connerly explained in an op ed for the Wall Street Journal.

Task force Diversity Summit

The Insurance department task force is planning a ‘Diversity Summit’ in October, with the goal of demonstrating “the importance of governing board diversity” within insurance companies, explained task force chairwoman Melinda Guzman, head of a certified Woman and Hispanic-owned law firm. Guzman said at the task force meeting that while she knows that her clients hire her for results, she is able to demonstrate the other benefits she offers as a woman and Hispanic law firm owner, to her clients.

However, she did not specify what those benefits are.  It must be something of a secret handshake in a private club; if you don’t know what the benefits are, you have no right asking.

Usually these alleged “benefits” involve access to government contracts, and insider information, which in a system already wrought with corruption and manipulation, will only make it worse.

The summit will be held in Los Angeles, and will present five panels covering “the changing demographics of California, California’s vision for diversity, the best practices from insurers successfully promoting diversity, challenges faced by diverse suppliers, and the importance of insurance company governing board diversity.”

Participants on the panels have not been confirmed, but invitees include Assembly Speaker John Perez, D-Los Angeles, Assemblyman Warren Furutani, D-Long Beach, Assemblyman Ricardo Lara, D-East Los Angeles, Senator Curren Price, D-Los Angeles, and former Democratic Assemblywoman Gwen Moore.

Mandating diversity policies with AB 53

Asking for voluntary support from the private sector must not be enough for the government. Because the private sector is operates in a market economy based on supply and demand, this insurance department demand becomes problematic as government controls overshadow business operations.

A completely free market is a form of a market economy where buyers and sellers are allowed to transact freely based on a mutual agreement on price without state intervention in the form of taxes, subsidies or regulation. However, we will always have taxes and regulation, and subsidies are rapidly increasing under the Obama administration, and the Gov. Jerry Brown government in California.

California has turned into the opposite of a free market ideal: Government regulated pricing, distribution, and production, limitations on commerce, and the ability to raise capital has even been hindered. While free markets are always hindered by government regulation and taxation, it is important to note that Communist governments pay lip service to the idea that each member of society will contribute as to their abilities, and receive goods and services as to their needs. It sounds good to people who want to hear this.

This is exactly what happened at the task force meeting. Lip service was paid to the private sector insurance businesses, which are so heavily regulated, they are held hostage by the Insurance Commissioner and state of California.

Several large insurance representatives attended the task force meeting to announce that they no longer oppose AB 53, but they don’t support it either. Insurance is neutral to AB 53, and that’s as good as it is going to get. And it apparently is as strong of a statement as insurance is willing to make in a state hostile to big business.

But that won’t stop the state’s Democratic politicians from pushing to require major California insurers to submit an annual report to the Insurance Commissioner regarding the implementation of their efforts to increase procurement from women, minority, and disabled veteran business enterprises.

Failure to file the report, by July 1, 2013, subjects the admitted insurer to civil penalties to be fixed by the commissioner.

This is a shakedown.

The Greenlining Institute, the lead proponent of the bill, states that the success of the PUC’s  supplier diversity program depends on consistent reporting requirements, goal setting, hearings, and strong regulatory leadership. Greenlining recommends this framework for the  insurance industry.

The Association of California Life and Health Insurance Companies and the American Council of Life Insurers oppose AB 53 and state in the bill analysis that this bill concerns them because “it would give the Insurance Commissioner the authority to develop and require outreach programs, thus limiting or disrupting individual company efforts to do what is best for the insurance business, communities and policyholders.”

Affirmative Action policies strangle business

“The longer we allow preferences to endure in the guise of diversity, the more damage will be done to the nation,” Connerly said.

The color-blind vision of John F. Kennedy, should have endured, but has been chipped away by liberals pushing affirmative action policies. Kennedy said that “race has no place in American life or law.”

Martin Luther King Jr. said that he dreamed of the day when the color of his children’s skin would be subordinate to the content of their character.

But not in California.

Task force members

Members of the task force include:

Melinda Guzman, attorney and task force chairwoman, General Counsel to the CA Hispanic Chamber of Commerce, and Director of the Federal Home Loan Bank of San Francisco.

Scott Syphax, the President and CEO of The Nehemiah Companies. Syphax also leads the development team of Sacramento’s Township 9, heavily taxpayer-subsidized for-profit development in downtown near the rail yard, a 3,000 unit master-planned community. Syphax is also a director of the Federal Home Loan Bank of San Francisco along with Guzman.

John Casas is President and majority owner of JT2 Integrated Resources, the nation’s largest Hispanic-owned third party administrator, and also a member of the CA Hispanic chamber of Commerce with Guzman.

Cecil Autry is an Associate Vice President and Regional Counsel for the Nationwide Insurance Group.

David A. Castillo is President and CEO for The Gray Casualty & Surety Company, a national surety providing support to standard and specialty markets. He oversees Gray’s national expansion and has been instrumental in creating bond programs for the City & County of San Francisco and the City of Oakland. Castillo is recognized as the first Hispanic President & CEO of a surety company.

Sam Kang is the general counsel for the Greenlining Institute, a national policy, organizing and leadership institute working for racial and economic justice. CalWatchdog published an investigation series of the Greenlining Institute, often called a cousin of ACORN, but instead found that it is the leading self-appointed national policeman for diversity in bank lending practices, corporate hiring and public utility contracts.

Phyllis Marshall is an attorney with Manatt, Phelps & Phillips, and lobbied the California Legislature, as well as Executive Branch agencies and other government offices and commissions.

Robert H. Mulz is the founder and current owner of Video Electronics in San Diego, and Chairman of The Elite SDVOB Network, a nonprofit national organization of service disabled veteran owned businesses.

Michael G. Keeley is the President of MGK Risk and Insurance, a certified minority business enterprise.