CALIFORNIA: AUDIT FINDS MISMANAGEMENT AT INSURANCE DEPT

      A new state audit has found that the California Department
 of Insurance "has delayed investigating thousands of complaints
 and has 'significant deficiencies' in the way it manages funds."
 State Insurance Commissioner Chuck Quackenbush (R) is at the
 "center of the storm," SAN FRANCISCO CHRONICLE reports.  "Armed"
 with the audit, a joint meeting of the state Senate and House
 insurance committees will "closely examine the inner workings" of
 the department, an "unusual" move, according to the CHRONICLE. 
 Lawmakers are paying "close attention" to the department because
 its "activities affect so many consumers and a powerful
 industry."    
      NOT THE FIRST STORM:  CHRONICLE reports that the insurance
 industry, which is regulated by the department, "largely
 financed" Quackenbush's 1994 campaign, providing 70% of his
 funds.  State Rep. Liz Figueroa (D), said, "We have a
 commissioner who was elected to be responsive to the electorate. 
 I don't see that happening" (Gunnison, 3/19).  Prior to the
 audit, the insurance department and the commissioner were
 involved in two other recent controversies.  Some politicians and
 health care experts wanted to transfer control over managed care
 regulation from the Department of Corporations to the insurance
 department, a plan that met with serious opposition (see AHL
 9/25/96).  In addition, the commissioner was forced last month to
 rescind his disputed directive that would have allowed insurance
 companies to sell long-term care policies with fewer benefits
 than guaranteed under a 1992 state law (see AHLs 2/25, 12/10/96).
      MOOD MUSIC:  The insurance department review, performed by
 State Auditor Kurt Sjoberg, found "serious problems in internal
 financial accounting" as well as with the Investigations Bureau,
 which examines "reports of misconduct by agents, brokers and
 insurers."  The audit found "[n]o investigators were assigned to
 122 of the potentially worst cases after more than two years." 
 The audit concluded that if the department "fails to complete
 higher-priority investigations, it risks losing the public's
 confidence in its ability to protect consumers from unethical
 insurance companies, agents and brokers."  Sjoberg stated in his
 report, "Because the department exhibits these financial and
 management shortcomings, we are concerned that the department has
 limited effectiveness in meeting the public's need for
 protection" (CHRONICLE, 3/19).