There is a lot going on in Washington DC in 2025. Unless you’re completely off the grid I’m sure you’ve heard about it from either the organized news media or social media, not all of which is accurate. We all have our own opinions. But what can these activities going on in Washington potentially mean to the insurance and risk management industry? Please note that I did my best to fact-check those activities but as it is a very dynamic and ever-changing environment right now, what was true yesterday may not be true today or by the time this blog is published.
Let’s look at some of the ways the federal government touches on the insurance industry and how some of the changes or proposed changes could impact us. The McCarran Ferguson Act was passed in response to the 1945 Supreme Court ruling that declared insurance was interstate commerce. The act doesn’t regulate insurance coverage but exempts carriers from certain federal ant-trust laws to allow carriers to pool data which helps them price products accurately and enter new markets. It also allows agents to compare coverages across markets.
Let’s start with more general topics before we get into the federal insurance programs that interact with private insurers:
The economy.
The stock market isn’t sure how to react and neither are some investors. As prices go up and the stock market drops, the ability to offset losses with income from investments in the stock market or government bonds can be reduced. When investment income goes down and the cost of claims goes up that can mean the insurance industry could go into a hard market where the premiums go up and coverage is more restrictive. It can mean that the appetite for writing business in some high risk or high dollar value areas isn’t there making it harder for businesses and consumers to find coverage they can afford to protect their home, property, business and family. Or that new industries that have a high level of risk with limited data to help underwrite that risk may have difficulty finding insurance coverage.
Tariffs: You don’t have to research or attempt to recall the impact that supply chain issues caused. Think Covid and the US in 2020 to 2022 when we had to ration toilet paper and repairs were delayed due to lack of parts and building products while the cost to do those repairs went up. Tariffs proposed and in place will have that type of impact on delays in repairs and the cost of claims. The United States gets 30% of our lumber and 80% of our building supplies from Canada. Even if they don’t refuse to sell their supplies to us, creating supply chain issues, the added cost on those products from the tariffs will impact the cost of repairs, rebuilding and homeowners’ claims.
Auto claims are not immune either as auto manufacturers and auto parts suppliers get 38% of their parts from Mexico, 10% from Canada and 9.5% from China. Just like with lumber, if we don’t face supply chain issues from their refusal to sell products to us, the costs associated with the tariffs will be passed along to the cost of insurance claims and ultimately in increased premium costs. For insurers it can mean more selective underwriting if we can’t increase premiums to offset those costs as consumers pressure\ states to hold insurance rates at the current level. Or ultimately it can mean less coverage for some consumers due to insurers withdrawing from their market.
Climate Change:
One of the executive orders signed by President Trump was to pause some of the climate change initiatives started by the prior administration. As part of that order, he directed the Environmental Protection Agency to look at the Clean Power Plans and Emission Standards. That also paused the $3 to $5 billion in funds that had been earmarked for the Electric Vehicle Infrastructure Program and increased EV charging stations. He paused wind farms. Withdrew from the Paris Climate Accord. And took steps to reduce any environmental barriers to increasing the production of fossil fuels, a major cause of the emissions that are blamed for climate change.
Catastrophic Losses and Limited Coverage: Climate change is believed to be behind the increase in catastrophic fires and storms impacting insurance customers and insurance carriers in the United States from the devastating LA Fires earlier this year, to the inland hurricane in North Carolina last year, to the power grid melt down in February 2021 that caused catastrophic water damage losses from frozen pipes in Texas. Climate change is blamed for the increasing size and location of Tornado Alley as well as the longer tornado season. Many of these catastrophic climate related losses are in areas of high population and property values in the United States, where homeowner’s insurers are already withdrawing from selling coverage. Many of the victims of the recent Los Angeles fires did not have sufficient or any insurance on their property due to the limited availability and cost. In Florida, the largest homeowner’s insurance carrier was the assigned risk pool.
FEMA/ Flood Insurance: There has been a conversation about eliminating FEMA (the Federal Emergency Management Agency) and putting control of disasters in the hands of the states where the natural disaster has occurred with the federal government providing some funds for disaster relief. Most governors are against the elimination of FEMA. They need the federal government and private insurers there helping their citizens. When a state suffers a catastrophic event, they can lose much of their infrastructure and businesses that they would look to for assistance in the recovery. The lack of those local resources can lead to delays and hardships for their citizens. The wider resource pool available to the Federal Government and increased buying power can provide the funds and services to help speed up recovery.
Beyond assistance in recovery, FEMA oversees and manages the National Flood Insurance Program (NFIP). NFIP is a federally backed insurance program that makes flood insurance available at an affordable price to renters, property owners, and businesses. It helps to encourage floodplain management to reduce flood losses and transfer some of the financial risks associated with those losses from potentially impacted property owners.
If FEMA is eliminated, or put in the hands of the states, how could that impact the management of the NFIP and the resources it brings to those communities in the floodplains? Would it be transferred to private insurers? Private insurers chose to exclude many flood-related losses from their homeowner’s policies due to the widespread loss exposure when flooding happens. How could private insurance make flood insurance affordable while not sacrificing coverage? And how available would those products be? Would private flood insurance be sustainable as the floodplain, and areas subject to catastrophic flooding in our coastal states and along rivers, continue to expand and the100-year floods become more frequent with climate change?
Crop Insurance: The Federal Crop Insurance Act is managed by the USDA and oversees the Federal Crop Insurance Corporation. The Act and FCIC were developed to help protect farmers against income loss due to crop failure and market changes while keeping food costs affordable for consumers. The program also provides reinsurance for state regulated private insurance companies who write crop insurance. While private crop insurance is available in 2021 $1.4 million of the crop insurance was written by the Federal Crop Insurance Program and only $1.2 million in coverage was provided by private insurance. Before Federal Crop Insurance, like many of the federally backed insurance programs, private insurers had a difficult time providing affordable coverage due to the inherent risk for catastrophic losses in a wide area. Like many other climate related risks to property owners, climate change and increasing areas of too much rain and too much drought continue to increase the risk of loss and frequency and severity of the resulting claims.
Other Federally Backed Insurance of Subsidized Coverages:
TRIA (Terrorism Risk Insurance Program). After 9/11 insurers were faced with providing coverage for an event where thousands of people were killed or injured in a large, orchestrated single act of terrorism that took place over three different areas. Their policies that excluded acts of war were expected to provide coverage for these losses despite them being considered an act of war. Because insurers were reluctant to provide affordable coverage for future losses due to acts of terrorism, TRIA was created to encourage insurers to cover those losses. In exchange for providing coverage, the Federal Government reimburses insurers for a portion of those losses. TRIA must be regularly renewed by Congress. The current TRIA is set to expire on 12/31/2027. With the current motivation to reduce the national debt and government costs, will Congress renew TRIA before it expires? If they don’t, will insurers be expected to continue to provide coverage for acts of terrorism? What will the cost be to provide that coverage?
Longshore and Harbor Workers Act: The act requires that private insurers provide workers’ compensation insurance for employees engaged in longshore, harbor or other maritime occupations. The Department of Labor Office of Workers Compensation Program (OWCP) overseas the USLS& H coverage and administers and pays claims for medical, disability, and vocational benefits.
Coalminers: Ther US Department of Labor also regulates workers compensation benefits for miners and former miners who are disabled due to Black Lung and their survivors. They administer the Black Lung Benefits Act. They provide the benefits that were previously provided by the Social Security Administration. Not only are benefits paid to miners who are totally disabled due to Black Lung and their survivors, but former minors receive medical treatment for their employment related respiratory condition under this coverage.
Federal Employers Liability Act (FELA): Employees whose occupations are related to the railroad and railways are provided with workers compensation insurance under the Federal Employee’s Liability Act. FELA oversees claims made by railroad workers who unlike standard workers compensation must show that the railroad was negligent to receive benefits. If they can prove the railroad’s negligence, those benefits are unlimited.
Medicaid: 20% of all citizens get their health insurance through Medicaid. Medicaid is a joint federal and state healthcare insurance program that provides health coverage for people with limited income and resources who are unable to purchase comparable insurance from the private insurance market. Beyond providing basic health care coverage for so many, it is also supplemental coverage for seniors to their Medicare or catastrophically injured people to cover medical charges that are not covered by Medicare or other coverages. 61% of all long-term care funding in the US comes from Medicaid. Lack of Federal funding will increase the burden on the states or leave 20% of the citizens uncovered which can have catastrophic consequences during outbreaks and pandemics to not only the ones lacking coverage but to all citizens. Think Covid or the current measles outbreak. Hospitals and clinics that provide indigent services for people without insurance do not do so in a vacuum. Those costs associated with that care are passed on to the covered consumer per higher costs of their healthcare or to the public through higher taxes to fund those hospitals.
Veteran’s Administration Healthcare: The Veteran’s Administration offers free healthcare or reduced healthcare premiums to veterans and their families. The coverage under TriCare or ChampVA provides access to wider coverage under a wider network of providers at a lower cost to those veterans and their families who are eligible based on their service history or individual needs and space availability. Free coverage is offered to veterans and their family who have service-related conditions or catastrophic disabilities, who cannot afford to pay for care, or who are at least 50% disabled.
Medicare: Is a federal program that provides health insurance to people aged 65 or older or for younger individuals with a disability. Medicare is based on a set standard for cost and coverage. Most people pay no premiums for part A. In 2025 Medicare part B premiums for most will be $185 per month. In 2022 Medicare provided health insurance for 65 million individuals. Medicare covers about 50% of the costs associated with healthcare for those enrolled in the plan. Coverage for those uncovered services comes from supplemental private insurance coverage called Medi-Gap. For those who have a lower income, they can obtain supplemental coverage through Medicaid. While Medicare is the primary payer, Medicaid is available for those who qualify to pay those expenses Medicare doesn’t cover. Changes in funding or staffing can result in loss of or delays in benefits to some of the most vulnerable citizens, or higher premium costs for basic care to those who are on Social Security or fixed incomes.
Anyone who works in Workers Compensation or Bodily Injury claims already knows the impact that a claimant being on Medicare can have in getting claims settled, both financially and timely. Changes in staffing or funding will undoubtedly have an impact of higher costs to those liability, auto and work comp insurance carriers.
Any changes in these coverages or fundings will potentially leave a group of people without coverage or with pressure for various private insurance coverages to be expanded or premiums to be reduced. In order to reduce premiums, deductibles or coverages will potentially also need to be reduced where possible. And as we saw during Covid, states may be reluctant to allow carriers to increase rates to cover losses, increasing the insurance strain in some jurisdictional markets and the out of pocket costs to consumers.
As I said at the beginning this is a very dynamic and changing environment we’re currently in but we need to be aware of possible future impacts it can have to prices, coverages and the industry as a whole in the future.
About the Author: Brenda McDermott, CPCU, CLP, SCLA, CIIP, SCLA, ARM, AIDA, AIC is a workers’ compensation claims specialist in The Hartford’s Major Case Unit. She is a past International Rookie, Claims Professional of the Year, Risk Management Professional of the Year and International CWC Speak-Off winner. She was the 2022 Region V Insurance Professional of the Year. She has been a long-time member of IAIP and served in multiple offices at the local, state, and regional levels. A Past Region V RVP she is currently serving as the Region 5 Marketing Director and Assistant to the RVP. She is Co-Chair of the International Marketing and Today’s Insurance Professional Committee. She is an MAL in Region 5 from Missouri.