In the last 40 years, several federal and state legislative shifts have significantly strengthened the financial and legal position of insurance companies, often at the expense of consumer rights or recovery potential.

Key Federal Legislation
The Gramm-Leach-Bliley Act (1999): This law repealed the 1933 Glass-Steagall Act, allowing banks, securities firms, and insurance companies to merge under Financial Holding Companies. While marketed as an efficiency measure, it allowed insurers to prioritize shareholder profits and use cross-industry data to refine risk assessments in ways that can lead to higher consumer costs.
Liability Risk Retention Act (1986): Originally intended to address a liability crisis, this federal law allows Risk Retention Groups (RRGs) to operate across state lines with only minimal regulation from their home state. This creates a "race to the bottom" where insurers seek states with the weakest oversight, often making it harder for policyholders to pursue claims effectively.
The Affordable Care Act (2010): While the ACA introduced consumer protections like the ban on pre-existing condition exclusions, it also mandated that most Americans purchase private insurance. This "individual mandate" effectively guaranteed a massive influx of new customers and subsidized premiums for the private insurance market.

State-Level and Regulatory Shifts
Tort Reform Laws (Ongoing): Over the last few decades, many states have passed "tort reform" measures—often heavily lobbied for by insurers—that place caps on non-economic damages (pain and suffering). These laws directly reduce the potential payout for insurance companies while limiting the legal recourse for individuals who have suffered catastrophic losses.
"File and Use" Laws: Many states have moved toward "file and use" systems for premium hikes. This allows insurance companies to increase rates immediately after notifying regulators, rather than waiting for prior approval. This shift often results in consumers paying higher premiums for months before a regulator can even begin to review if the hike was justified.

Here is a brief summary of how legislative changes have specifically favored insurance companies across major sectors over the last 40 years.
Health Insurance
The Individual Mandate (ACA, 2010): While the ACA expanded coverage, it initially mandated that individuals purchase private insurance or pay a penalty. This created a guaranteed, massive customer base for private insurers.
ERISA Preemption (1974/Ongoing): The Employee Retirement Income Security Act (ERISA) prevents many policyholders from suing their health plans for damages beyond the cost of the medical treatment itself, effectively insulating insurers from large malpractice or bad-faith lawsuits.

Auto Insurance
Tort Reform Caps: Many states have passed laws capping non-economic damages (like "pain and suffering"). This limits an insurer’s maximum payout regardless of the actual harm caused by a negligent driver.
Statute of Limitations Reductions: Recent state laws (e.g., in Florida) have shortened the time victims have to file a claim from four years to two, making it harder for injured parties to build a case while reducing the long-term financial exposure of insurers.

Homeowners Insurance
Assignment of Benefits (AOB) Repeals: States like Florida recently ended the practice of allowing homeowners to sign over their insurance benefits directly to contractors. While designed to stop fraud, it makes it more difficult for homeowners to get repairs done without paying large sums out-of-pocket first.
Reinsurance Subsidies: States have created multibillion-dollar taxpayer-funded "backstops" that help private insurers buy reinsurance (insurance for the companies themselves). This stabilizes insurer profits during disaster seasons but often does not result in lower premiums for homeowners.


In California, insurance law is uniquely shaped by Proposition 103 (1988), which requires the state to approve all rate hikes before they take effect. However, recent legal and regulatory shifts—specifically those addressing the current wildfire crisis—have introduced changes that critics argue provide significant new financial advantages to insurance companies.

Homeowners Insurance
Sustainable Insurance Strategy (2024–2025): To prevent more insurers from leaving the state, the California Department of Insurance introduced reforms allowing companies to use "forward-looking" catastrophe models to set rates. Previously, they could only use historical data; this change allows insurers to raise premiums based on predicted future climate risks.
Reinsurance Cost Pass-Through: New rules allow insurance companies to pass the costs of their own reinsurance directly to California homeowners. Previously, this was prohibited, as reinsurance markets are unregulated and global.
FAIR Plan Modernization: While expanding the FAIR Plan (insurer of last resort) provides a safety net for homeowners, it also relieves private insurers of the obligation to cover high-risk properties, allowing them to maintain more profitable portfolios elsewhere.

Health & Medical Liability
MICRA Modernization (AB 35, 2022): For 47 years, the Medical Injury Compensation Reform Act capped non-economic damages (pain and suffering) at $250,000, a limit that did not account for inflation and primarily served to limit insurance payouts. While AB 35 began gradually raising these caps in 2023, the phased-in nature still protects insurers from the immediate full-value claims that would exist without statutory limits.

Auto Insurance
SB 1107 Liability Shifts (2025): Starting in 2025, California is finally raising its minimum liability limits, which were among the lowest in the nation for decades. While this helps victims, the law essentially mandates higher premium revenue for insurance companies by forcing all drivers into more expensive policies, providing a massive, government-mandated boost to the industry's bottom line.