NY Lawmakers Agree to Governor’s Auto Insurance Reforms

By Andrew G. Simpson

After bypassing the April 1 deadline and engaging in weeks of debate and compromise, New York lawmakers finally agreed in late May on a $268.5 billion budget that includes auto insurance reforms championed by Gov. Kathy Hochul that are intended to reduce auto insurance costs for drivers and businesses.

The auto insurance reforms target fraud, “runaway” litigation, legal loopholes, non-economic damages and enforcement gaps in an effort to lower insurance costs. They are key parts of a $268.5 billion budget for the 2026-2027 fiscal year that seeks to tackle rising insurance, energy, housing, childcare, education and other everyday costs for New Yorkers.

The new budget is $14 billion more in total spending than the 2025-2026 budget. The new budget does not raise income or statewide business taxes.

The insurance measures include a cap on non-economic damages for drivers engaging in criminal behavior, a clarification of what constitutes a “serious injury,” changes to comparative negligence law and a crackdown on those responsible for organizing staged accidents.

The budget also has consumer protection measures prohibiting auto insurers from basing rates on homeownership status, occupation, education level or zip code; mandating insurers provide policyholders with explanations of why their premium increased; and requiring insurers to return any “excess profits” to policyholders.

Estimated Savings

A study by the Citizens Budget Commission (CBC) found the provisions should reduce a New York driver’s premium by about 10%. CBC, insurers and other supporters of the reforms have cited the success that Florida, Michigan and other states have experienced with similar reforms.

According to CBC and the Hochul administration, New Yorkers’ auto insurance premiums are among the highest in the country. The average premium in New York in 2023 was $1,896, 32% higher than the national average, 12% higher than New Jersey, and 51% higher than Illinois.

Yet, CBC has noted, despite those high rates, insurance companies have continued to lose money on New York’s auto policies–particularly on liability claims. In 2023, insurers lost 17% on auto insurance in New York after expenses.

Opposition to the by the state’s trial lawyers was a major obstacle. Trial lawyers questioned the promise of lower costs for drivers. They argued that the overall changes disadvantage crash victims to benefit insurers and firms like Uber. They maintained that the reformsy will not lower rates but will mean injured people receive less compensation.

“Insurance profits must not come at the expense of justice, accountability, or the rights of injured New Yorkers,” Andrew Finkelstein, president of the New York State Trial Lawyers Association, told lawmakers.

The group Citizens Action has also criticized the focus on restricting claims and damages, pointing to a study by Weiss Ratings that found large auto insurers operating in the state “closed nearly half of liability claims in 2025 without paying a dime to policyholders.” The same report questions how closely the state has regulated insurers’ pricing, noting that since 2015, the large insurers have generated $42.3 billion in investment and other income, exceeding their $27.9 billion in net underwriting gains.

In the end, lawmakers went along with most of Hochul’s auto insurance measures while adding consumer protections of their own.

The one Hochul proposal that did not receive approval had to do with joint and several liability. In situations where some defendants fail to pay, the governor’s proposal would have limited the exposure of remaining defendants with the ability to pay to their share of fault.

Enactment of the budget was applauded by the insurance industry.

“New York State is turning a corner. The newly enacted state budget tackles auto insurance fraud and excessive litigation through the most significant reforms to the state’s auto insurance laws in decades,” commented David H. Borg, chair of Big I New York. “With these changes, we anticipate that New Yorkers will finally begin to see relief from some of the highest auto insurance costs in the nation.”

“Governor Hochul is taking an important step to fix a system that has been driving up costs for New York families for far too long,” said Kristina Baldwin, vice president of state government relations for the American Property Casualty Insurance Association (APCIA). “These reforms will promote fairness in auto accident lawsuits while discouraging abuse that ultimately raises premiums for everyone.”

Topics Auto Legislation New York