PFAS and How They Could Impact The Insurance Industry

In 2022, the United States Environmental Protection Agency (EPA) released a new set of advisories on PFAS found in drinking water. The EPA also allocated large funds to tackle these and other “emerging contaminants” due to the risks they pose to public health. It’s a well-known fact that these chemicals persist in the environment and in our bodies, taking “forever” to break down. 


What Are PFAS and What’s The Potential Harm? 

PFAS stands for per- and polyfluoroalkyl substances. They are a group of man-made chemicals widely used in various industrial and consumer products since the 1940s. Currently, there are over 9,000 of them in existence. PFAS are valued for their water- and grease-resistant properties, making them useful in products such as non-stick cookware, waterproof clothing, stain-resistant fabrics, firefighting foams, pesticides, food packaging, cosmetics, and more.

What’s unique about PFAS is their chemical structure, consisting of carbon and fluorine atoms forming strong, carbon-fluorine bonds. These bonds make PFAS highly persistent in the environment because they do not easily break down. Their durability is what earned them the nickname “forever chemicals.” PFAS can accumulate in nature, in wildlife, and in human bodies over time. In fact, one CDC report found PFAS in the bloodstream of 97% of Americans. 

The concern surrounding PFAS arises from their potential adverse health effects. The Social Science Environmental Health Research Institute put together a PFAS-Tox database to highlight the toxicity of PFAS chemicals. 

Some studies have linked PFAS exposure to negative health consequences, including the following:

  • Increased risk of certain cancers
  • Altered metabolism and increased risk of obesity
  • Increased risk of developing diabetes
  • Increased risk of cardiovascular disease
  • Liver damage
  • Reduced immune system response
  • Thyroid hormone disruption
  • Decreased fertility 

This disease burden that comes from these chemicals is substantial. In a study published in July 2022, researchers estimated that PFAS exposure increased disease costs in the United States by $5.52 billion. They also noted that this calculation was conservative. PFAS exposure may increase costs by up to $62.6 billion when considering costs due to medical care and lost productivity. Those health and economic effects are where the insurance industry comes in.

How Could PFAS Chemicals Impact The Insurance Industry?

The use of PFAS chemicals has several potential implications for the insurance industry. Here are five ways in which PFAS chemicals could impact the insurance sector:

1. Liability Claims 

Researchers have linked PFAS to many adverse health effects. As awareness grows and scientific evidence strengthens, individuals and communities affected by PFAS contamination may file liability claims against companies responsible for releasing or using these chemicals. 

PFAS litigation has begun, with lawsuits already filed against Dupont and 3M for water contamination. Those are just the beginning; there’s a noticeable uptick in PFAS-related litigation, which involves not only PFAS manufacturers but also companies that merely use PFAS-containing materials.

This could lead to an increase in insurance claims related to PFAS contamination. Down the road, this may result in higher costs for insurers.


2. Environmental Liability Coverage 

Insurers that offer environmental liability coverage may face increased claims related to PFAS contamination. This coverage typically helps businesses manage the costs associated with pollution incidents. If companies are found responsible for PFAS contamination, they may seek coverage for cleanup costs, legal expenses, and potential damages. 

As the awareness of PFAS contamination grows, insurers may need to assess their underwriting practices and potentially adjust their coverage terms and premiums.


3. Product Liability Coverage 

PFAS chemicals have been used in a variety of consumer products, including non-stick cookware, waterproof fabrics, and firefighting foams. They are also linked to serious medical conditions, including cancer. If products containing PFAS are found to cause harm or health issues, insurers offering product liability coverage could face increased claims and litigation related to these products. This may lead to adjustments in underwriting practices, coverage limits, or exclusions specific to PFAS-containing products.


4. Regulatory Compliance and Risk Management

Regulations around PFAS chemicals are continuously changing, with stricter guidelines and standards being established by government agencies. For that reason, insurers need to stay updated on regulatory changes and ensure their clients are staying compliant. Insurers may also want to promote risk management practices among their policyholders to mitigate potential liabilities associated with PFAS use or contamination.


5. Reputational Risks

Insurers themselves may face reputational risks if the public believes they are providing coverage or support to companies involved in PFAS contamination or failing to address the risks associated with these chemicals. Stakeholders, including customers, investors, and advocacy groups, may closely scrutinize insurers’ actions and demand transparency regarding their approach to PFAS-related risks.


Final Thoughts

It’s important to note that the specific impact of PFAS chemicals on the insurance industry may vary depending on factors such as jurisdiction, policy terms, and the constantly changing scientific and regulatory landscape. Insurers should consider the potential implications for their operations, risk management strategies, and coverage offerings. It’s also wise to take inventory of previously underwritten risks and carefully assess new risks at submissions. Insurers should continue to pay attention to scientific and governmental updates on PFAS concerns. They should also stay informed about litigations arising from PFAS contamination.

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