Looking Ahead: Where Deregulation Might Take the Insurance Industry
With the U.S. insurance sector stepping into a new chapter of sweeping deregulation, conversations are heating up around what this could mean for risk management. executive order 14192, “Unleashing Prosperity Through Deregulation,” sets a bold precedent—calling for the removal of ten existing regulations for every new one added. For insurers, this shift could significantly reshape business operations, especially when it comes to managing risk.
While it’s still too early to see the full picture, several key areas of insurance are likely to feel the impact.
1. Risk Assessment and Pricing: More Freedom, More Risk
Less regulatory oversight could open the door to more aggressive risk models and pricing strategies. In a highly competitive market, insurers may be tempted to underprice policies to attract more customers. But if the premiums don’t accurately reflect the underlying risks, insurers could be left financially exposed, with inadequate reserves to cover future claims.
2. Product Innovation: A Double-Edged Sword
Deregulation could spur a wave of new, innovative insurance products designed to meet the evolving needs of consumers. While innovation is generally a positive force, it can also lead to the creation of complex offerings with unpredictable risk profiles. Without sufficient guardrails, insurers might find themselves exposed to liabilities they didn’t fully anticipate.
3. Capital Requirements and Solvency: A Delicate Balance
One of the safety nets regulations provide is the requirement for insurers to maintain a minimum level of capital. This ensures they remain solvent and can pay out claims even in tough times. If those requirements are loosened, some insurers might opt for thinner capital cushions to improve short-term profits—leaving them more vulnerable during economic downturns or spikes in claims.
4. Risk Equalization: Equity at Risk
Risk equalization helps prevent insurers from cherry-picking low-risk customers while leaving high-risk individuals behind. It’s designed to make insurance fair and accessible to all. If deregulation weakens these mechanisms, coverage could become harder to get—or more expensive—for people who need it most, deepening inequality in the insurance market.
5. Market Stability and Consumer Protection: A Warning from the Past
Without proper oversight, markets can quickly spiral. History has shown that deregulated environments can lead to instability—especially when insurers pursue high returns by taking on excessive risk. Weak consumer protections could also result in mis-sold policies, unfair claim denials, and widespread mistrust in the industry.
The Responsibility Shift
Whether you see deregulation as a path to innovation or a risky gamble, one thing is clear: reducing rules doesn’t eliminate risk. It simply moves the responsibility from regulators to the companies themselves. In this new landscape, insurers will need to be more vigilant than ever—actively assessing and managing their exposure, building stronger internal controls, and safeguarding consumer trust.
If they don’t, the costs—financial, reputational, and legal—could be significant.
The Road Ahead
The full impact of executive order 14192 on the insurance sector will take time to unfold. What remains to be seen is how companies respond—whether they take this as an opportunity to grow responsibly or push the limits of risk in pursuit of short-term gains. What’s certain is that this is a pivotal moment for the industry, and its long-term stability may well depend on the choices being made today.
