Wednesday, January 6, 2010

Ruling Against Insurance Industry Harms, Not Helps Consumers

An appeals court in California has upheld a part of Proposition 103, the initiative passed in 1988 guiding much of the insurance business in the state, stating that insurance providers must pay the legal costs of consumer challenges to rate increases even if the challenge is settled out of court.

While the exact effect of this ruling on the industry is unknown, it is more than likely it will lead to providers being far more caution in requesting any rate increase due to the potential costs incurred should an individual or organization choose to object.

Although on the surface this comes off as a win for the consumer, in fact it could well turn into a detriment. If reluctance to request rates at an appropriate level due to lack of desire for incurring extra costs takes root, inevitably this will lead to carriers being in a weakened condition and/or pulling out of California altogether.

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