Beyond Dawlish

Through the Looking Glass: How Deregulation Could Reshape Insurance

As the U.S. insurance industry enters a new chapter under sweeping insurance deregulation, many are wondering how this shift might affect the way insurers manage risk. While it’s still early to know the full effects of Executive Order 14192, “Unleashing Prosperity Through Deregulation,” there are several key areas where changes could be felt most.

1. Risk Assessment and Pricing: A Delicate Balance

Looser regulatory oversight may give insurers the freedom to experiment with more aggressive pricing and risk models in an effort to stay competitive. But this freedom comes with risk. Companies might underprice policies to attract customers, only to find themselves without adequate reserves when claims come due. If premiums don’t match the true level of risk, financial stability could quickly become compromised.

2. Product Innovation and Rising Complexity

insurance deregulation could pave the way for a surge in new insurance products—tailored, flexible, and designed to meet evolving customer needs. While innovation is typically welcomed, the downside is that complex products can also introduce unknown or poorly understood risks. Without strong internal checks in place, insurers could find themselves exposed to liabilities they didn’t fully anticipate.

3. Capital Reserves and Solvency Risks

Traditionally, insurers are required to hold a certain amount of capital to ensure they can pay out claims—even during tough economic times. With relaxed capital requirements, some companies might choose to operate with thinner financial buffers. While this might improve profitability in the short term, it raises the risk of insolvency in times of high claim volume or market downturns.

4. Risk Equalization and Fair Coverage

Risk equalization helps ensure insurance is accessible and fairly priced for everyone, including individuals with higher risk profiles. If insurance deregulation weakens these mechanisms, we could see greater disparities in coverage. High-risk individuals may find themselves facing higher premiums or reduced access to insurance altogether, which could deepen existing inequalities in the market.

5. Market Stability and Consumer Protections

In a highly deregulated environment, competition may intensify, pushing some insurers toward riskier practices in pursuit of profits. History shows that such behavior can lead to instability. Without strong oversight, the risk of systemic failures grows—alongside the likelihood of consumers being harmed through unfair practices like policy mis-selling or denied claims.

The Shift in Responsibility

Whether seen as an opportunity or a risk, deregulation does not remove the need for sound risk management. It simply shifts the responsibility from regulators to the insurers themselves. Companies will now bear the full burden of identifying, managing, and mitigating risks—both to protect their own financial health and to maintain the trust of their policyholders.

Neglecting this responsibility could result in far-reaching consequences, including financial losses, damage to reputation, and increased legal exposure.

Looking Ahead

The long-term effects of the 10-for-1 deregulation policy on the insurance sector remain unclear. What’s certain is that the landscape is changing—and insurers must be ready to adapt. The coming years will be crucial in understanding how this regulatory rollback influences risk strategy, industry stability, and consumer protection.

As the dust settles, one thing is clear: in a world with fewer rules, the stakes are higher for everyone involved.