The Trump Administration & The P&C Insurance Industry: Donald Trump’s Impact on P&C Insurance

To call the Trump Administration a controversial administration is an understatement. The 45th POTUS has been one of the most polarizing personalities in national and global politics in recent years. Everything he has done, from his trade tariffs, his misleading statements, or his environmental policies, has drawn supporters and critics in equal measure. 

The House of Representatives recently impeached him. Yet, he shows no sign of slowing down. Despite being contentious, the Trump Administration has managed quite a few wins in their tenure. Unemployment is at a record low, and the economy is improving 

While the Federal Reserve has played its part, the numbers say that Trump’s “America First” policy is working. CNN reports that the stock markets are at a record high and unemployment is at a record low. Despite the social and political issues plaguing Trump, 76% of Americans believe that the economy is “good.” 

The Trump Administration and the P&C Insurance Industry

P&C Insurance is a booming market. Regulatory and statutory measures have made insurance compulsory. It is not a market that will decrease!   

But how has the Trump Administration influenced this industry, if at all? 

To understand this, let’s go back to the starting point of Trump’s tenure.   

When he was elected president, P&C insurers were cautiously optimistic. They believed that Trump would favor the industry more than Obama. Obama’s Labor Department spent considerable time and effort regulating Worker’s Compensation, which they expect will be non-existent under Trump. 

Despite record-low unemployment, Trump is also abandoning the pro-union approach Obama had to workplace issues. 

Lack of federal oversight resulted in benefits for insurers and employers. However, American Progress believes that the workers might be at a disadvantage. The current administration dismantled a lot of regulations put in place by the Obama Administration. However, worker’s compensation is not the only place that has felt the effects of the Trump Administration. 

The Trump Administration’s trade tariffs and Auto Insurance

Trump’s “America First” stance on trade has led to numerous tariffs against a variety of nations. These also include close allies such as the EU and Canada. The administration renegotiated the terms of the NAFTA (North American Free Trade Agreement) deal and rebranded it as the USMCA (United States Mexico Canada Agreement). This move struck a blow to the auto manufacturing industry.  

A lot of automobiles that would qualify for the tariff exemption are now excluded. This led to an increase in the price of motors. That increases auto insurance premiums. 

Trump also imposed tariffs on China. This power move also affected the auto insurance industry. Car parts will be more expensive. So, tariffs in goods imported from China (including car parts) will either increase premiums or deductibles for customers. 

Insurers need to pay higher claim amounts. As a result, the premiums go up. Higher premiums are favorable to the insurers. But they will put a sizeable dent in the insured’s pockets.

 

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The effect of tariffs on Construction and Homeowner’s Insurance

Trump imposed tariffs on imported aluminum by 10% and steel by 25%.  These tariffs have led to the cost of construction to increase. Yes, it did boost the domestic manufacturers quite a bit. However, the simple fact is that we use more steel and aluminum than we can produce.   

These tariffs caused a lot of construction projects to stop. Investors needed to be wary, which eventually shifted the insurance numbers. Homeowner’s Insurance policies saw an average premium increase of around 1.6% yearly. However, III Org. states that Renter’s Insurance fell by 2.7% in 2019.  

This data shows that the number of homeowners is decreasing. And the number of people renting is increasing. Commercial property insurance is also slowing down, with rising premiums and reduced policies in the current climate.

Trump Administration’s changes to HealthCare

During the fall of 2017, President Trump tweeted, “Obama Care is a broken mess.” Trump’s policy from the beginning was to replace and repeal the previous President Obama’s signature health law. These are some of the significant changes to the existing health care plan: 

The Trump administration eliminated the Individual Mandate. Previously, non-insurance holders needed to pay a certain amount of tax/penalty. The purpose was to keep the premium prices low and affordable. On January 1st, 2019, the tax for not having an insurance policy decreased to $0. This change also hurt the insurance industry. The premiums increased by about 32% on average according to KFF Org. 

The compulsion of people to show work documents for Medicaid. Previously, the federal government facilitated funding to expand Medicaid eligibility, which included low-income adults to be eligible for coverage. Which, in turn, would provide more people to become eligible for Medicaid. After a month of the policy introduced in August 2018, out of the 265,223 people enrolled in Arkansas, 62,000 subjected to the new rule. And by December 2018, 18,000 people faced removal.

Subsidiaries ended: The funding that was previously there to ensure the insurance premiums rates were affordable has now been stopped. As a result, the insurers had to offer subsidies to low-income people. In the end, the premium prices increased significantly. Also, the Trump administration introduced a cap on medical malpractice insurance, where the maximum a person could receive for non-economic damage was $250,000.  

Expanded skinny plans: On June 14th, 2019, the Trump administration had issued a new rule stating that the duration of the short term/skinny plans is extended to 364 days from 90 days. The downside of this rule is that they usually have a deductible of $12,500 on average. For instance, in Virginia, skinny plans start at $70 premium with a deductible of $5,000.  

Funds for HealthCare.gov reduced: The navigator program created to encourage people towards coverage sign-ups stopped. The rate of uninsured people in the US increased from 7.9% (25.6 million people) in 2017 to 8.5% in 2018 (27.5 million people).   

So, what does this mean?

The Trump Administration hasn’t focused on the P&C Insurance sector, specifically. Any industry disruptions are because of various policies and tariffs that the administration imposed. Or due to a shift in focus for federal oversight.  

Whereas, on the Healthcare side of the insurance industry, various policies and caps are imposed on the existing healthcare system. Overall, the altercations to the policies have increased the prices for premium rates.  

Insurance will always be needed. Yet, under Trump, prices are going up. And oversight is going down. Overall, the Trump Administration has favored insurers over the insureds. It will be interesting to see what the administration does in its second term. If it stays, that is!  

Do you agree with us? Let us know in the comments below!

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