They Are All Afraid of Herb the Horrible

The chairman of a billion-dollar insurance company shouts "Denenberg!" whenever he misses a putt on the golf course because that is the nastiest oath he knows. Other insurance leaders as well as some hospital administrators, doctors, trial lawyers and auto-company executives can barely repress their anger whenever they hear the name. Of all the meddling bureaucrats and thorn-in-the-side consumer advocates who afflict big business, none is so infuriating as Herbert Sidney Denenberg, the insurance commissioner of Pennsylvania.

Insurance commissioners are often bland political appointees who rubber-stamp rate increases, but Denenberg is doing his belligerent best to shake and change the industry. In his first 18 months in office, the red-haired former professor, 42, has made remarkable progress. Ralph Nader, who recommended Denenberg for the job, predicts that he will be "the most outstanding commissioner that the country has ever had." Pennsylvania Governor Milton Shapp, who is often overshadowed by his headline-making employee, tells audiences jestingly: "You may not know me, but I'm the guy who brought Herb Denenberg to Harrisburg."

One of Denenberg's most famous actions was to publish "shopper's guides" showing comparative costs of life and auto insurance policies. The life-policy version (see box) revealed great price variations for roughly the same kinds of coverage. Policy buyers and other state insurance commissioners have sent for more than 50,000 copies of the free guides, and publishers are retailing copies for up to $2.95.

Over his desk, Denenberg has placed the Latin motto Populus iamdudum defutatus est, which he translates as "The consumer has been screwed long enough." To help beleaguered buyers, Denenberg has ordered all the 1,157 insurance companies that do business in Pennsylvania to appoint ombudsmen to hear consumer complaints. He has sent traveling teams of investigators to hear gripes from policyholders in small communities throughout the state. Consumer complaints are pouring in to Denenberg's office at an annual rate of 50,000, up from 25,000 in 1971. He has conducted televised hearings and investigations on just about every topic remotely connected with insurance, from auto repairs to pension funds. "Our game plan is simple," he explains. "We just give the public the facts, and they're appalled. I'm accused of being a publicity hound, but my job is to get publicity, to communicate. Until insurance becomes a matter of breakfast-table conversation in this country, nothing will happen."

No facet of insurance has escaped him. When Denenberg became upset over the difficulty of replacing a taillight on his state-owned Buick Le Sabre, he made the extravagant charge that General Motors designers made cars hard to repair in order to drive up repair costs for the benefit of dealers and parts manufacturers. With that, G.M. sent two executives to Harrisburg to inspect Denenberg's car. (They claimed it had suffered a "rear impact" that complicated repair of the taillight.) Denenberg has called the present system for paying auto-accident claims "a legalized racket," noting that the Pennsylvania state lottery pays out to winners more of the money it collects (45-c- on the dollar) than auto insurers pay out on claims to accident victims (about 42-c- on the dollar). Says Denenberg: "You are better off with a goddamned lottery ticket."

Denenberg has ordered companies that write fire and homeowner's insurance to offer more and bigger deductibles in order to bring down rates. He has asked the state legislature for authority to make those companies organize assigned-risk "pools" similar to those used by auto insurers to cover any customers who cannot find a firm willing to insure them. Last week, while other state officials in the flood-torn Northeast were praising relief efforts, Denenberg excoriated federal officials for not having publicized federal flood insurance. "A lot of people would have been better off if they had tossed a match to their homes before leaving them," he said. "At least most of them had fire insurance coverage."

Medical insurers have received some of Denenberg's sharpest thrusts. He has denied rate increases to health insurers unless they submit proposals for pressuring hospitals into cutting their costs. To prove that he meant business, he rejected a $73 million rate increase from the state's Blue Cross group health insurance system and ordered its directors to renegotiate Blue Cross contracts with some 90 hospitals. The new contracts must include 34 cost-control guidelines that he proposed. For example, hospitals now have to buy generic drugs instead of more expensive name-brand drugs. In Blue Cross's defense, Denenberg notes that the system returns 96-c- in benefits for every premium dollar, compared with 53-c- to 58-c- on the dollar for most nongroup health companies. For that reason, Denenberg has proposed giving Blue Cross and other group systems a statewide health insurance monopoly. He has also blasted doctors for performing unnecessary hysterectomies: "They have got everybody's tonsils, and now they are after the uterus."

Enter, the Demons. Governor Shapp, who campaigned as an advocate of consumerism, has let Denenberg exercise near dictatorial power. One day last year, without any advance notice, the commissioner led a group of his young aides--often called "Denenberg's Demons"--into the offices of a major Philadelphia-based insurance company. There they exercised the commissioner's technically legal prerogative of examining all the company's records. "You should have seen the look on the president's face when I asked him to turn over his own correspondence," Denenberg says, adding that the raid turned up a number of "irregularities" that could lead to prosecution of the firm for violations of the state insurance code.

Denenberg's critics call him a fanatic and a rabble-rouser. Others doubt the effectiveness of his abrasive approach. "We'd give him high marks on intent, but believe that some of his methods will be counterproductive to the long-range interest of the consumer," said John Byrne, senior vice president of the Travelers Insurance Co. Yet Denenberg's critics uniformly commend his expertise. Born in Omaha and educated at Johns Hopkins, Creighton, Harvard and the University of Pennsylvania, Denenberg is one of the nation's few insurance commissioners with a Ph.D. in the subject. As Loman Professor of Insurance at Penn's Wharton School of Finance and Commerce, he wrote four books and nearly a hundred articles on insurance. "He loves to attack the Establishment, whatever it is," says Professor Dan McGill, chairman of Wharton's insurance department. Other colleagues recall that the professor's brashness cost Penn at least $1,000,000 in contributions from insurance companies. Denenberg says that his Loman chair, endowed with $500,000 in gifts from insurance companies, was "the worst investment those bastards ever made."

Still, Denenberg denies with tongue in cheek that he is abrasive. "My mother thinks I'm sweet. I just tell the truth. If the truth hurts, that's not my fault. That's the truth's fault." He also rejects the notion that he would enjoy more cooperation from the insurance industry if he dispensed honey instead of vinegar: "Powerful interest groups don't roll over and play dead for you. You have to come on with a strong argument and create intense public pressure, or else changes don't take place." His future? He tells anyone who will listen that insurance is his life's work. "I look upon insurance as a lever to move the world," he says. "There are all kinds of issues that involve insurance--auto safety, rebuilding the cities, health care. I could work the next 100 years and still not get around to all the problem areas."

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