On the day of Donald Trump’s inauguration as the 45th president of the United States, the insurance industry is waiting to see how the former real estate mogul’s policy proposals could affect their businesses.
"There are two aspects to keep an eye on," says Celent analyst Mike Fitzgerald. "One, is the general business environment more or less uncertain? And second, does business investment increase in net terms, balancing increased emphasis on domestic versus global production, impact of tax reforms, if any, and impact of regulation easing."
Of all insurance lines, health insurance is likely to see the biggest change, if not the soonest. Trump made repealing and replacing the Affordable Care Act a central tenet of his campaign, which has been greeted with some excitement.
“I hope for a repeal and return of the ACA to the states where it belongs,” said Ted Nickel, president of the National Association of Insurance Commissioners, at the Property/Casualty Joint Industry Forum in New York this week. “I think revisions to Dodd-Frank might soon come up as well.”
Congress has already made some headway on the former, but there is still confusion as to what the latter will entail. Trump told the Washington Post earlier this week that his plan was “very much formulated down to the final strokes” and that he and Congressional Republican leaders were ready to unveil it. He also stated that “we’re going to have insurance for everybody,” and that people who haven’t been able to afford insurance would have an option under his plan.
For other insurance lines, Trump’s proposed reforms to the federal government will have less of an specific insurance impact because of the state-based insurance regulatory system, Novarica’s Mitch Wein says. But there are other Trump proposals that can impact insurers’ bottom lines., especially in the technology organization.
"The big question is whether the Trump era will encourage more technological and regulatory flexibility and innovation at the federal level, and indirectly at the state levels," says Celent analyst Donald Light.
The President has stated a desire to rein in the H-1B visa system that technology organizations use to bring in international workers. Trump wants to raise the minimum wage paid to these visa recipients so they don't undercut the U.S. labor market. He reiterated his desire to stimulate hiring of American workers in his inagural address today.
Trump also supports allowing greater government oversite of consumers' personal communications, and opposes the "net neutrality" regulation that allows smaller companies to compete with larger companies for internet traffic speeds.
But it's not all restrictions coming for the tech sector, though. Trump named a supporter of Uber and other ride-sharing and sharing-economy services, Elaine Chao, to his cabinet, indicating that this economic sector has a future. That's good news for insurance companies that are providing new kinds of products to cover the gig economy.
Overall, though, tax reform is likely to have the largest impact on P&C insurance in the short term.
“An expansionary fiscal policy will raise interest rates quicker, helping insurers to be more profitable,” Wein adds. “Additionally, the strategically important financial institution designation could be repealed if Dodd-frank is altered, impacting the largest insurers.”
If regulations on the financial sector are loosened, says Northwestern Mutual’s Tim Schaefer, it may be easier for insurance and financial technology startups to work across the country.
“Right now we’re seeing is a lot of uncertainty around the regulatory environment,” he says. “But there is likely to be some changes in this space, which could create a little more room for fintech and the whole digital model to work nationally.”
