New York’s High Insurance Costs Driven by Legal and Regulatory Factors

Insurance premiums in New York are substantially higher than the national average, with rates about 15% above other states. This disparity significantly impacts living costs including rent, healthcare, and construction expenses. The average claim in New York exceeds $7,000 per household, far outpacing the national average of $4,200. Auto insurance costs are particularly high, with New Yorkers facing premiums 52% above the national average and expected to increase by 7% in the coming year, with Brooklyn residents paying over $6,700 annually for full coverage. The elevated insurance rates are linked primarily to New York’s legal framework, especially the absence of limits on jury awards for pain and suffering. This legislative environment contributes to higher claim costs and incentivizes fraudulent activity under the state’s no-fault auto insurance law, which allows quick payouts up to $50,000 per person without regard to fault. In 2024, no-fault insurance fraud constituted 75% of all such reports in New York, with 38,000 cases filed. Comparative analysis shows states like Florida and Michigan, which recently reformed their no-fault insurance systems by limiting or ending these provisions, have experienced rate reductions of between 6% to 15%, alongside decreased litigation. Ohio’s capping of non-economic damages further illustrates regulatory approaches that contribute to lower premiums. These reforms not only reduce costs but also enhance insurer solvency and market competition. Beyond auto insurance, New York faces elevated insurance expenses in construction due to stringent laws such as the Scaffold Law, which holds property owners and contractors fully liable for gravity-related worker injuries, regardless of fault. Lawsuits under this statute report average claims over $1 million, significantly higher than neighboring states. The growth of third-party litigation financing has further escalated insurance-related costs by increasing the volume of claims and lawsuits. Recent state measures, including capping interest rates on litigation loans at 25%, target this trend but additional reforms may be necessary to effectively curb excessive litigation and associated expenses. Overall, the unique legal and regulatory environment in New York is a critical factor in its elevated insurance costs. Adjusting no-fault auto insurance laws, reforming liability standards in construction, and addressing litigation financing could yield significant savings, alleviating the city’s broader affordability challenges.