States not Slowing This Year

For the last several months, developments at the federal level have dominated our political and policy discourse.

But, of course, a lot of our industry’s fate lies with the states. Unlike their federal counterparts, state policymakers can move fast and often without cross-party compromises. This makes the state policy arena more interesting, sometimes more productive, but always riskier. What might the states throw at us in 2025?

First, let’s level set on the political landscape. And “level” might be just the word for it. For all of the fireworks and shake-ups around the 2024 federal elections, state elections mostly resulted in the status quo.

The incumbent party won in all 11 gubernatorial races, so no political sea changes are expected from the highest state offices. There was a bit more action in the legislatures, but even there we saw relatively little movement. Republicans flipped the Michigan House, but party control in other state legislatures went unchanged. Margins did shrink in some states—Democrats lost their supermajority in New York and Vermont, and Republicans lost theirs in North Carolina, Wisconsin, and Montana. Republicans also gained a supermajority in South Carolina.

More relevant—if not any more riveting—for the broker community, we have some new insurance regulators. Democrat Patricia “Patty” Kuderer in Washington and Republican James Brown in Montana are newly elected. Both replaced commissioners from the same party, so we aren’t anticipating huge policy swings. Kuderer says she plans to focus on universal healthcare efforts and climate risk. Brown ran on a platform of making Montana a more welcoming regulatory environment to attract insurers.

We also have two recently appointed insurance commissioners: Michael Caljouw in Massachusetts and Holly Lambert in Indiana. Vermont commissioner Kevin Gaffney announced his retirement in November, so we can expect a new face there as well.

Finally, to round out the picture, both the National Association of Insurance Commissioners (NAIC) and the National Conference of State Legislators (NCOIL) will usher in new leadership in 2025. Commissioner Jon Godfread from North Dakota is the incoming president of the NAIC, replacing Connecticut Insurance Commissioner Andrew Mais. Godfread favors a “back to basics” agenda for the organization focused on consumer protection, carrier solvency, and other bread-and-butter insurance regulatory issues. At NCOIL, Assemblywoman Pam Hunter, a Democrat from New York, will take over as president from Representative Tom Oliverson, a conservative M.D. from Texas.

The Issues

As the second Trump administration settles into D.C. and sets to work undoing various executive and regulatory actions of the Biden administration, and as tax reform becomes the federal policy issue of 2025, we could see lagging legislative and regulatory activity around other core insurance issues—for example, pharmacy benefit manager (PBM) reform, catastrophe preparedness, and loss mitigation. We expect that the states will pick up some of these balls and run with them.

Top of mind for virtually all insurance regulators is home insurance rates and availability. States are working hard to attract and keep carriers in the wake of 2024’s catastrophic storms, floods, and fires. The NAIC conducted a nationwide ZIP code-level data call for home insurance in 2024 to help states identify where real coverage gaps and competition concerns exist. And policymakers at the NAIC and NCOIL have shifted focus to resiliency and mitigation measures and helping protect consumers financially through, for instance, state Catastrophe Savings Accounts and grant programs for updating and fortifying roofs.

PBM reform—an area where the feds have struggled to pass any meaningful measures (the continuing budget resolution passed by Congress in late December excised most of our PBM reform wish list, which had been included in an earlier version that was torpedoed by a successful campaign on X by President-elect Trump and Elon Musk)—is another front-and-center issue for the states. In the face of federal inaction, states have gone gangbusters with new legislation to address PBM licensure, pharmacy gag clause issues, rebate pass-throughs, and transparency requirements. We do not expect them to slow down anytime soon. In fact, as more insurance departments decide to license and regulate PBMs, the NAIC is developing a standardized resource for market conduct regulators to use to examine PBMs, which could result in greater and more consistent oversight of their activities.

Insurance policymakers also are stepping into the fray with various technology issues, including data privacy, cybersecurity, and AI regulation. Since 2023, 18 states have passed privacy laws impacting insurance licensees. The NAIC also is updating its model legislation that implements the Gramm-Leach-Bliley Act privacy provisions to better align the model with recent state actions. Relatedly, and in the wake of multiple major cyberattacks targeting the insurance industry, the NAIC adopted in 2024 a uniform Cybersecurity Event Response Plan for insurance regulators; it is also considering establishing a centralized cyber incident repository for state regulators to share information and data about cyberattacks.

As of early 2025, just under half of the states had adopted the NAIC’s AI Model Bulletin or some other insurance-specific AI guidance, and the NAIC has been collecting data on use of AI across different lines of insurance. So far, states’ approaches have focused on proper oversight of AI systems by businesses, monitoring and remediation of any unfair discrimination or bias issues in AI systems, transparency around use of AI, digital system security, and privacy. As incidents involving AI inevitably crop up, we could see insurance policymakers agitate for more prescriptive measures.

Finally, and more generally, states are investing their scarce time and resources in enforcement. Even though most state insurance departments are understaffed and overstretched, and we are seeing long delays in rate/form and licensing areas, we are not seeing a slowdown in audits or examinations. Many states are hiring outside consultants with varying degrees of experience and subject matter expertise to perform these enforcement functions, which naturally creates incentives for longer and more thorough audits, and of course, collection of fees. So, maintaining robust compliance programs likely will pay off for insurance licensees in the coming year.

With all of this ongoing and anticipated activity, we cannot afford to ignore the states. They do not hesitate to fill the void when the federal government isn’t making policy. In recent years, state insurance policymakers have demonstrated willingness—perhaps even eagerness— to get out of their “insurance lane” and dig into cross-sector general business issues like data privacy and AI. This landscape presents lots of opportunities for problems to actually get solved but also plenty of risk that bad policy will sail through undetected and/or unchallenged. While the federal government has its eye on tax reform, the states will have their eye on anything and everything. For the insurance industry, it most assuredly will not be a dull year on the state policy front.