Through the Looking Glass: How 10-for-1 Deregulation Could Reshape Insurance Risk Strategies

 

With the signing of Executive Order 14192 – "Unleashing Prosperity Through insurance deregulation" in early 2025, the U.S. insurance industry finds itself entering unfamiliar territory. This order introduces a dramatic new policy: for every new regulation enacted, ten existing regulations must be removed. It's a bold shift designed to spark economic growth, but it also raises serious questions about how insurers will manage risk in a leaner regulatory landscape.

While the full impact of this change will take time to unfold, several key areas are already drawing attention. Here’s where we could see the most significant effects:

1. Risk Assessment and Pricing Pressures

Freed from some regulatory guardrails, insurers may pursue more aggressive risk assessment techniques and pricing strategies in an effort to boost competitiveness. But there’s a danger here: underpricing policies to gain market share could lead to premium levels that don’t match the actual risk being taken on.

The result? Insurers may find themselves with insufficient reserves to cover claims, especially in high-loss scenarios—potentially threatening their own financial stability.

2. Innovation Comes with New Risks

Looser regulation could open the door for more innovative and customized insurance products. This might lead to greater flexibility for consumers and new revenue opportunities for providers. However, with increased innovation comes added complexity—and potentially greater risk.

If insurers introduce products without fully understanding their risk profiles, they may be exposed to liabilities that aren’t captured by existing models. The push to innovate could unintentionally create blind spots in risk management.

3. Capital Adequacy and Solvency Concerns

One of the fundamental roles of regulation has been to ensure that insurers maintain adequate capital to remain solvent in times of crisis. Relaxing these requirements might offer short-term financial gains, but it also increases long-term exposure to insolvency—particularly during claim-heavy periods or economic shocks.

Insurers operating with thinner capital cushions could struggle to absorb losses, placing both their policyholders and broader financial systems at risk.

4. Changes to Risk Equalization

Risk equalization ensures a fair distribution of coverage costs by preventing insurers from avoiding high-risk customers. If insurance deregulation weakens these mechanisms, the result could be increased pricing disparities and reduced access to coverage for individuals with greater health or lifestyle risks.

Such changes could further segment the insurance market and widen the gap between high- and low-risk policyholders, raising concerns about fairness and equity.

5. Market Stability and Consumer Protections at Risk

History has shown that unchecked competition can lead to risky behavior. In a less regulated market, insurers may take bigger gambles to chase higher returns—potentially destabilizing the market in the process.

Without strong consumer protection rules in place, issues like policy mis-selling, unfair claim denials, and insufficient disclosures could become more common. If consumers lose confidence in the system, the repercussions could be widespread, both reputationally and economically.

The Burden Shifts: Insurers Must Self-Regulate

Regardless of whether one supports or opposes insurance deregulation, one fact is clear: eliminating rules doesn’t eliminate risk. Instead, the responsibility for managing that risk now rests squarely with insurers.

Without the external oversight that has long shaped industry standards, firms must take a proactive approach to governance. That includes strengthening internal controls, reassessing risk models, and putting safeguards in place to protect both the business and its customers.

Failure to do so could open the door to serious consequences—from financial losses and legal liabilities to lasting damage to brand reputation.

Looking Ahead

The full effects of Executive Order 14192 on the insurance sector remain uncertain. What’s clear is that the move toward deregulation will test the industry’s ability to maintain stability, protect consumers, and manage risk effectively without relying on government mandates.

How insurers adapt in the months and years ahead will determine whether this policy shift becomes a success story of innovation—or a cautionary tale of oversight removed too soon.