PROPOSITION 103 PAPER
Research California Proposition 103 which passed in 1988. Describe the changes introduced by Prop 103 and some background on the politics that led to the passage of Prop 103. Do you agree with the changes made to rate regulation in California after the passage of Prop 103? Support your opinion.
In 1988, voters in California approved Proposition 103 by a narrow margin of 51%. Before the passage of the proposal, California was one of the few states where the insurance industry was not regulated by the government. Insurance companies did not have to seek approval for premium rates, making the cost of insurance relatively high. Moreover, existing laws shielded the state’s insurance industry from competition. Thus, neither government supervision nor free market forces were allowed to play a role in moderating the impact of the insurance industry on California’s economy. Proposition 103 sought to create a fair and more competitive marketplace for insurance and impose regulations in the industry. More than a quarter a century later, the passage of Proposition 103 and its subsequent implementation have dramatically changed the course of California’s regulatory structure and by extension that of the property-causality insurance industry in the United States. This paper describes and analyses the changes introduced by Proposal 103.
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