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If Congress fails to pass a budget for the rest of 2011 and the federal government temporarily shuts down, it should still be business-as-usual for the property/casualty insurance industry.
Since the industry is largely regulated by the states, not Washington, the impact on the property/casualty insurance industry should be minimal. Most insurance licensing, product and rate approvals, and other state regulatory activities will continue.
A shutdown will not affect the federal flood insurance program, which will continue to sell and service policies, or the federal crop insurance program, according to officials.
Also, the Federal Emergency Management Agency (FEMA), part of the Department of Homeland Security, will continue whatever disaster efforts it has underway, including those for spring floods, since those are funded out of a special disaster relief fund and not annual appropriations. If there were a major disaster where states needed assistance, FEMA could be called on for help.
“We’re not aware of any significant impact a short shutdown would have on the industry, and if it results in a more responsible federal budget it could make things better for business in general,” Matt Brady, National Association of Mutual Insurance Companies, told Insurance Journal.
Insurance lobbyists are a bit worried about delays in flood insurance reform and other bills.
“They’re in a holding pattern,” said John Prible, vice president, federal government affairs, the Independent Insurance Agents & Brokers of America, or Big “I.”
Prible and the Big “I” have something to keep them busy even if the government shuts down. The Big “I” is preparing for its annual legislative conference next week with agents coming in from across the country to meet with their elected representatives. But Prible says the meeting will proceed.
“The show is definitely going on,” Prible told Insurance Journal. He said the Big “I” has confirmed with all of its speakers and checked with many Congressional offices, most of which still plan to hold constituent meetings. Right now it appears any disruption would be minor.
Airlines and Amtrak will be running so those needing to travel for business should not encounter any trouble, although those needing passports will likely experience a delay.
In terms of other business effects, since the self-funding U.S. Post Office will still operate, premium checks and policies can still be mailed. Also, federal courts and juries will continue to operate.
Hundreds of thousands of federal employees could see their paychecks delayed. Prible noted that if this were to continue for a long time, agents with a lot of federal employees or contractors as customers might have to worry about their customers’ ability to keep up payments. But that should take awhile.
According to the Congressional Research Service, recent shutdowns have ranged from three to 17 days. In November 1995, there was a five-day shutdown, followed by 21-day shutdown from December 1995 to January 2006.