The P&C insurance industry by and large will not suffer directly from the huge cuts in government programs set to launch on March 1, but one executive at Lockton cautions that employers should remain vigilant against questionable Workers' Comp claims as local economies feel the squeeze.
On Friday, $85 billion in cuts to the federal budget, dubbed the “sequester,” will go into effect. Every government program will feel the pinch of lost revenue, including the military. States that are heavily dependent of federal dollars, such as Hawaii where federal spending is 15.8 percent of the state's GDP, will feel the impact, causing localized recessions. Overall, the initial impact on the nation's GDP could be 0.3 percent.
“I expect the net impact on the insurance industry to be very small and not be discernible when we look at first-half 2013 numbers,” says Robert Hartwig, chief economist and president of the Insurance Information Institute Inc.
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