Insurance companies meet often with their agents and brokers to monitor market conditions. This year, across all product lines, the most frequently flagged concerns are the potential impact of tariffs and ongoing economic uncertainty. Savvy insureds should factor this into their buying decisions.
Tariffs on imported goods have already inflated the cost of repairs and replacements covered by insurance. Insurers are likely to pass these increased claims costs onto policyholders through higher premiums.
Supply chain disruptions may factor in as tariffs settle and costs adjust. As seen during the pandemic, such disruptions can delay repairs and extend claims duration, raising administrative costs for insurers and frustrating policyholders.
Industries relying heavily on imported materials will face increased operating costs, potentially leading to higher commercial insurance premiums. The replacement value of inventory, parts, fuel, and other overhead may drive the need for higher exposures and policy limits.
While tariff negotiations continue, the insurance industry will remain exposed to the broader economic uncertainty they create. A downturn or recession could lead businesses and individuals to cut coverage, raise deductibles, or cancel policies, reducing premium income. Increased uncertainty may also raise the risk of business defaults, affecting commercial lines such as trade credit insurance.
Volatility in investment income also affects premiums, as insurers rely on returns to maintain profitability. When returns fall, they may tighten underwriting — while seeking more revenue — by raising scrutiny and eligibility requirements. Writing less business is a blunt but often-used tool to limit losses from rising claims costs.
Economic hardship can also exacerbate social inflation, with increased litigation and higher jury awards, especially in liability lines. This trend has been growing and could accelerate under worsening economic conditions.
The combination of tariffs and economic uncertainty is likely to create a challenging 2025 for the U.S. insurance market. Policyholders should expect upward pressure on premiums across multiple lines. The ability of both insurers and policyholders to manage risk and adapt to evolving conditions will be crucial to mitigating these impacts.
