California Life and Health Insurance Practice Exam

What is a potential outcome of an unfair discrimination ruling against an insurer?

1. Increased premiums across the board

2. Fines or penalties imposed

3. Improved services to customers

4. Mandatory policy adjustments

The correct answer is: Fines or penalties imposed

In the context of insurance regulation, when an unfair discrimination ruling is made against an insurer, it can lead to fines or penalties imposed by regulatory authorities. This occurs because insurance companies are required to adhere to fair underwriting practices that do not discriminate based on inappropriate factors such as race, gender, or religion. If an insurer is found to have engaged in unfair discrimination, they may face sanctions as a way to enforce compliance with these regulations and to deter similar behavior in the future. The other options do not align with the primary consequences associated with an unfair discrimination ruling. Increased premiums across the board is less direct; while companies may adjust pricing strategies, it isn’t an immediate outcome of a ruling. Improved services to customers doesn't inherently follow from a ruling of unfair discrimination; while it's possible for insurers to enhance their services post-ruling, this isn't a mandated reaction. Lastly, mandatory policy adjustments could occur, but they are more indirect and not as immediate or enforceable as fines or penalties. The direct consequence of a ruling is primarily about accountability through financial penalties imposed on the insurer.