Small businesses have big stake in insurance commissioner's race.

Possibly the most important political contest this year, as far as small-business owners are concerned, is the race for California's insurance commissioner. The considerable costs associated with workers' compensation insurance, as well as the possibility that universal health care is on the horizon, makes the insurance commissioner one of the most important government positions to the future of California small businesses.

While workers' comp costs and employer-mandated health care coverage have grabbed news headlines, small-business groups insist a more mundane problem must first be addressed by California's future insurance commissioner -- increasing small-business owners' access to insurance coverage.

Fact is, getting property and casualty insurance coverage is one of the main obstacles to starting a new small business. Access to such insurance is increasingly limited -- especially in low-income areas of California.

Lack of insurance coverage also complicates the process of applying for business loans from financial institutions. Most banks require that businesses be insured before being considered for a loan.

"The reality is that minority businesses cannot get insurance," said Bob Gnaizda, general counsel of the Greenlining Coalition, a San Francisco-based nonprofit minority-business advocacy group. "That is particularly true of businesses that are located in the inner city."

Both the Democratic and Republican candidates for insurance commissioner -- state Sen. Art Torres, D-Los Angeles, and state Assemblyman Chuck Quackenbush, R-Campbell -- will have to face queries about how they would extend insurance coverage to businesses in underserved areas.

Torres' legislative aide Manuel Hernandez stated that, as chairman of the California Senate Insurance, Claims and Corporations Committee, Torres has an established track record of pushing to get insurance coverage for small businesses that have been refused coverage by insurance companies. Last year, Torres introduced two bills, SB 1106 and SB 1381, aimed at creating incentives for insurance companies to extend coverage to small and minority-owned businesses, said Hernandez.

Quackenbush's campaign manager, Greg Butler, said his candidate is aware of small-business owners' insurance needs and is prepared to address their concerns. Quackenbush has not assessed the problem facing minority businesses in particular, but difficulties in getting insurance is not limited to the inner city, said Butler. "Insurance companies in general are resisting writing new policies, or are leaving the state, because of the regulatory environment," said Butler.

The Greenlining Coalition recently completed a study of 300 Latino-owned businesses in South Central Los Angeles and discovered that not a single one had full insurance coverage. In fact, the majority had no insurance at all, said Gnaizda. Of those that did have coverage, most held policies with offshore companies. Gnaizda said many offshore carriers have been known to have poor track records for paying out claims.

Several small-business sources said they hope the results of the Greenlining Coalition study will call attention to the insurance dilemma facing small and minority-owned businesses and will spur the new insurance commissioner to action.

The coalition has repeatedly urged the insurance commissioner to use his office's power to approve rate increases as a tool for persuading insurance companies to boost their coverage of inner-city businesses.

Gnaizda said the approach to anti-redlining being advocated by his group is similar to the incentives outlined in proposed revisions to the Community Reinvestment Act now being considered in Congress.

The reinvestment act is aimed at encouraging banks to extend business lending in underserved areas. Banks which meet the act's requirements are given regulatory relief in return for the "community service" they perform by lending to inner-city businesses.

Besides applying rate-setting clout, the insurance commissioner can use mere education to motivate insurers to increase their inner-city business coverage. Many insurance companies' perception that writing policies in the inner city is unprofitable may not be accurate. And it is the commissioner's responsibility to inform insurers of possible profit opportunities in underserved areas.

Inner-city advocates criticized savings and loan institutions for years for neglecting to make home loans in inner-city areas, added Gnaizda. Now that data is available on home mortgage lending activity in low-income areas, and lenders have demonstrated that they can profit in those areas, a growing number of institutions are getting into low-income lending programs, said Gnaizda.

Several small-business sources complained there was little mention during the June primary races about how the insurance commissioner candidates plan to address the special needs of the growing small and minority-owned business community.

The unavailability of insurance coverage discourages many entrepreneurs in the inner city from opening shops and, in turn, creating jobs for inner-city residents, sources said. Other entrepreneurs operate their businesses without business licenses because they believe they must first have insurance to qualify for a license.

"That is why the inner city doesn't have a lot of business developing," said George Bivens, a board member of the Black Business Association. "It is because companies won't write in that area."