The U.S. insurance industry is entering uncharted territory following the introduction of executive order 14192, “Unleashing Prosperity Through Deregulation.” Signed in January 2025, the executive order 14192 sets an aggressive benchmark: for every new federal regulation introduced, ten existing ones must be scrapped. This dramatic escalation from earlier deregulatory efforts is set to have far-reaching consequences, particularly for how insurers manage risk.
While the full impact of this policy shift is still unfolding, there are several key areas within the industry that could face significant change.
1. Risk Assessment and Pricing: Walking a Tightrope
Without the usual guardrails, insurers may feel more freedom to adopt bolder risk models and pricing strategies. In a more competitive, less regulated environment, there’s a real temptation to underprice policies to grab market share.
But this comes with a cost. If premiums fall short of covering potential claims executive order 14192, insurers could find themselves under-reserved—exposing their financial health to serious risk. Striking a balance between competitiveness and sustainability will be more important than ever.
2. Innovation and Product Complexity: A Double-Edged Sword
Deregulation could unlock new opportunities for innovation, encouraging insurers to create more customized and sophisticated products to meet evolving consumer demands. This could be a good thing—more choices, more flexibility, more market dynamism.
However, complexity carries its own risks. When new products outpace the industry’s ability to understand and evaluate them properly, insurers could be left vulnerable to unforeseen liabilities. A lack of oversight might accelerate product development, but it also heightens exposure to hidden pitfalls.
3. Capital Requirements and Solvency: Leaner, But Riskier
Traditionally, capital adequacy rules have ensured that insurers maintain enough reserves to withstand financial shocks and large claim events. Deregulation may ease these capital requirements, allowing firms to operate with slimmer safety cushions.
While this could boost short-term profitability, it also raises the stakes. Lower capital buffers increase the risk of insolvency during turbulent times—whether that’s due to a natural disaster, economic downturn, or sudden spike in claims.
4. Risk Equalization: A Threat to Fairness?
Risk equalization helps ensure that insurers don’t cherry-pick low-risk customers while excluding those who pose a higher risk—like the elderly or those with chronic health conditions. If deregulation weakens these mechanisms, insurers may move toward more discriminatory pricing and coverage models.
This shift could make insurance less accessible or more expensive for vulnerable populations, challenging the industry’s role in promoting equity and shared risk.
5. Market Stability and Consumer Protection: Fragile Ground
In the absence of strong regulatory oversight, insurers might adopt riskier practices in pursuit of higher returns. This kind of aggressive competition has historically contributed to financial instability—as seen during past crises when poorly regulated markets spiraled out of control.
Consumer protections could also be weakened, potentially leading to issues like mis-sold policies, unclear coverage terms, or unjustified claim denials. If consumers lose trust in the industry, the damage to reputations and long-term profitability could be significant.
The Bigger Picture: Responsibility Without Regulation
Regardless of where one stands on deregulation, one fact remains clear: removing regulations doesn’t eliminate risk—it simply shifts the responsibility. In this new landscape, insurers must step up and take a more proactive role in identifying, assessing, and mitigating the risks they face.
Firms that fail to adapt risk running into serious consequences, including financial losses, reputational harm, and legal exposure. On the other hand, those that embrace this challenge may find opportunities to innovate, streamline operations, and build more resilient risk frameworks.
