New York Proposes Rule to Require Prior Approval of Auto Insurance Rate Hikes

New York officials are moving to require auto insurers to obtain prior approval before implementing any increases in private passenger insurance rates.

The New York State Department of Financial Services (DFS) has proposed a regulation amending the process for insurers filing private passenger auto insurance rates. The regulation is part of the effort to implement consumer measures included in a series of reforms passed early in the summer as part of the current budget to help bring down the cost of auto insurance in the state.

The new rate regulation will require insurers to seek express prior approval from DFS before implementing any upward rate changes. Currently, under the state’s “flex-rating” system, insurers may implement no more than two overall average private passenger auto rate increases without the department’s prior approval if the cumulative effect of the rate increases are within 5%.

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Additionally, the new regulation will require insurers to explain any rate changes to policyholders including if any decrease is being implemented as a result of the insurance reforms passed in the 2027 budget.

“This regulation strengthens transparency for New York policyholders by ensuring that any increase in private passenger auto rates is subject to comprehensive and independent review,” DFS Acting Superintendent Kaitlin Asrow said.

There will be a public comment period on the proposed regulation until Nov. 9.

The auto insurance reforms include several other consumer protection measures including ones that prohibit auto insurers from basing rates on homeownership status, occupation, education level or zip code and require insurers to return any “excess profits” to policyholders.

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Other reforms addressed insurance fraud and litigation costs. DFS has advised insurers to consider these reforms in their pricing:

Expanded Definition of “Fraudulent Insurance Act”: Prosecutors are now able to seek criminal penalties against all individuals responsible for organizing or facilitating a staged accident, not just the individual behind the wheel.

Limiting Damages for Individuals Engaging in Unlawful Behavior at the Time of an Accident: Damages are capped for drivers engaging in criminal behavior at the time of an accident to ensure that drivers who violate the law, including uninsured motorists, drunk drivers, and drivers in the act of committing a felony, do not receive disproportionate financial recoveries at the expense of policyholders.

Tightening the Serious Injury Threshold: The enacted budget modifies the definition of “serious injury” so that damages for pain and suffering or emotional distress are reserved for those persons able to objectively demonstrate that they have suffered serious injuries.

Limiting Damages for Individuals Who Are “Mostly” At Fault in Causing an Accident: Drivers found to be primarily responsible for causing an accident are now unable to sue other parties for outsized damage payments. This change puts New York in line with most other states.

Updates to Approval Authority Over Auto Insurers’ Rates: New limits have been put in place requiring companies to seek express prior approval from DFS before any upward rate changes.

DFS said insurers are expected to “determine what steps they need to take to comply with the new requirements, including incorporating the anticipated savings from these reforms in all pending and future” auto rate filings.

“New Yorkers deserve a transparent, fair and accountable auto insurance market that puts customers first,” Governor Kathy Hochul said of the proposed prior approval regulation. “This regulation delivers on our commitment to strengthen consumer protections and give policyholders greater confidence that insurance companies are being held to clear standards.”

Topics Auto New York Pricing Trends