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Expect a lot of activity at the state level on insurance issues in 2025, so says attorney Karen C. Yotis, content manager for insurance on the Practical Guidance team for LexisNexis®.
We asked Yotis, a frequent contributor to State Net® Capitol Journal™ articles, to outline for us what she believes will be the top compliance issues for the insurance industry this year.
Much of the industry’s attention, she said, will be determined by the actions of the new Trump administration, although she added that there’s more going on in the insurance world than just what Trump is doing.
In November, members of the National Association of Insurance Commissioners (NAIC), the non-profit organization made up of chief insurance regulators from the states that sets the standards for the U.S. insurance industry, elected new officers for 2025. NAIC’s new president is Jon Godfread, the insurance commissioner for North Dakota, and Yotis said he favors state regulation over federal and is staunchly pro-market.
She predicted that his ascension to the top spot, combined with President Trump’s preference for state regulation—she said Trump doesn’t let the Federal Insurance Office say much of anything—will result in “a lot of state action in 2025.”
Much of that action, she believes, will focus on supplemental benefits and short-term limited-duration insurance, which she said regulators are wary of, particularly how they’re marketed.
More than 14 million patients were impacted by data breaches of U.S. healthcare organizations in 2024, according to the cybersecurity firm SonicWall. And researchers pointed to the increasing use of AI and other digital tools as a contributor to these breaches, as their use expands the “attack surface” of organizations.
Yotis expects this to be a major concern for regulators in 2025 and insurance compliance officers to be spending a lot of time making sure their organizations’ data is protected as much as possible.
The tax cuts from the first Trump administration—the Tax Cuts and Job Act (TCJA) of 2017—expire at the end of this year. The impact that could have on a litany of issues, from Medicare expansion to Social Security, is enormous.
It’s unclear exactly what President Trump will do, but it’s safe to assume he’ll be eyeing some kind of response. Yotis said the insurance industry will be hoping the new administration will make some targeted cuts to ease the burden of red tape, either through this process or through Elon Musk’s much-talked-about Department of Government Efficiency, which technically isn’t an actual federal department.
Still, Yotis said the insurance sector will be looking to the pro-business administration for regulatory relief, and it’s probably a safe bet that the Trump administration will do something that industry leaders will like.
So far this year, at least three states have prefiled or introduced legislation to restrict the use of drones or aerial images by insurers, according to the LexisNexis® State Net® legislative tracking system. The National Council of Insurance Legislators is also working on model legislation dealing with the regulation of drones.
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Yotis said there’s growing concern about the use of drones in underwriting and claims adjusting. A San Diego County homeowner recently filed a lawsuit against Liberty Mutual, claiming that her homeowners insurance policy was cancelled after an aerial inspection of her home conducted by a drone found mold on her roof.
In response, Yotis said, there’s a lot of talk about stepping in to regulate the use of drones in the industry. In fact, a number of bills to do just that have been introduced in state legislatures this year, including Indiana HB 1109 by Rep. Matt Lehman (R). Yotis also said the National Council of Insurance Legislators is working on model legislation dealing with the regulation of drones.
Finally, Yotis said the insurance industry is chafing over an increase in legislation concerning its marketing conduct as well as mandates that it turn over information to regulators.
“Market conduct is a huge issue,” she said, noting that in times past insurers would be regularly reviewed on their behavior in the marketplace. Now they find themselves under the microscope of regulators at random times, perhaps when a regulator stumbles across something they find questionable or when someone complains about an insurer’s behavior.
Yotis said she recently heard that the volume of market conduct legislation increased dramatically in the last six months, potentially increasing the burden on the industry.
At the same time, she said, the industry struggles to respond to all of the “data calls” it receives—that is, mandates that it provide loads of information to regulators or the NAIC, perhaps as far down as to the zip-code level. She said these demands are incredibly onerous for insurers, and they’re looking to make such data calls more regular, so they can plan for them better.
Even if half of the issues Yotis has identified become a point of focus for legislators and/or regulators this year, compliance officers in the insurance industry could have their hands quite full in 2025.
—By SNCJ Correspondent BRIAN JOSEPH
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