New York Proposes Major Reforms to Lower Vehicle Insurance Costs

New York’s Auto Insurance Reset: What Hochul’s 2026 Proposals Could Mean for Carriers, Claims, and the Courtroom

New York’s private passenger auto market has long carried a familiar label in underwriting circles: high premium, high friction. Governor Kathy Hochul is now putting a full package on the table that aims to push those numbers in a different direction by targeting fraud, reworking key liability rules, and tightening the path from no-fault to litigation.

The headline statistic driving the urgency is affordability. The Governor’s office says the average New Yorker spends just over $4,000 a year on car insurance, roughly $1,500 above the national average. (Governor Kathy Hochul)

At a high level, the proposals read like a coordinated attempt to reduce claim severity and cut avoidable loss adjustment expense, while also promising a regulatory lens on whether savings actually show up in premiums. For insurers, MGAs, TPAs, defense counsel, and fraud investigators, the practical question is simple: which levers move loss cost fastest, and which ones reshape behavior over time?

“Car insurance rates are just too damn high, especially at a time when families are feeling squeezed by the cost of living.”
Governor Kathy Hochul (Governor Kathy Hochul)

A whole of government posture on fraud, with staged crashes in the spotlight

Fraud is the connective tissue across nearly every component of the Governor’s plan. The State is signaling that staged accidents are not just an insurer problem, but an organized-crime problem with consumer-price consequences.

Among the more notable moves: reinvigorating the Motor Vehicle Theft and Insurance Fraud Prevention Board and explicitly tasking state agencies to coordinate more actively. The plan also emphasizes supporting prosecutions aimed at organizers of staged crashes, not only the driver involved in the collision. (Governor Kathy Hochul)

That framing matters for industry because it aligns investigative work, referral practices, and evidentiary standards with prosecution outcomes, not just claim denials. It also suggests carriers may see increasing expectations around the quality and timeliness of fraud referrals.

Insurer reporting windows and the reality of building a fraud case

One proposal that may seem procedural but could be meaningful in practice is giving insurers more room to report and allege suspected fraud, including changes that reduce barriers to filing fraud allegations and allow more thorough investigations. (amNewYork)

For SIU teams, this is essentially about the clock. Staged-loss networks are rarely proven in a single claim file, they show up in patterns. More time and clearer pathways can improve the odds of connecting participants, providers, and treatment narratives before files are forced into settlement posture.

Tightening who can collect non-economic damages, and when

Hochul’s proposal set takes direct aim at a politically sensitive but actuarially familiar driver: non-economic damages.

The State is proposing to cap non-economic damages in scenarios involving unlawful behavior at the time of the incident, including impaired driving, and also to limit non-economic damages when a driver is “mostly at fault.” (Governor Kathy Hochul)

“If you were driving drunk, driving without a license, or committing a felony at the time of a crash, you should not get a payday.”
Governor Kathy Hochul (Insurance Journal)

For carriers, the impact here is less about frequency and more about severity distribution. If adopted, these changes could reshape settlement valuations and reduce leverage in cases where comparative fault or unlawful conduct is present.

The serious injury threshold: moving from vague to medical criteria

New York’s no-fault framework has long been defined by its “serious injury” threshold, and insurers have argued that the ambiguity invites litigation and inconsistent outcomes.

The Governor’s plan calls for tightening that threshold with more objective medical criteria. (CNYBJ)

This is a key point for claims leaders because it influences two expensive junctions: when claimants can exit no-fault into tort, and how consistently adjusters can predict litigation risk. If the threshold becomes more objective, the market could see fewer marginal cases converting into lawsuits, and faster alignment between medical documentation and compensability.

Joint and several liability: a targeted recalibration

Another proposal tackles New York’s liability allocation rules. The Governor is backing changes that would reduce exposure for defendants who are less than 50% at fault, limiting their obligation to their share rather than a larger portion of non-economic damages. (Governor Kathy Hochul)

From an underwriting perspective, this is about tail risk. When joint and several rules expand who can pay, they also expand who gets targeted. A shift toward paying proportionate share may reduce severity in multi-party losses and could influence how carriers price liability in dense, multi-vehicle environments.

The savings question: DFS and the Excess Profit Law

If reforms reduce loss costs, regulators and policyholders will want evidence that savings flow through to rates. Hochul’s plan explicitly directs the Department of Financial Services to re-examine the Excess Profit Law, including the threshold trigger, to ensure consumers are prioritized if savings materialize. (Governor Kathy Hochul)

This is an important signal for rate strategy teams. Even if the proposals improve combined ratios, the regulatory conversation may quickly shift to how that improvement is reflected in filings, competitive positioning, and consumer communications.

What to watch next: practical implications for the industry

The strongest immediate effects, if the package advances, are likely to appear in claims handling, litigation posture, and fraud operations. Longer-term impacts could show up in pricing adequacy and market participation, depending on how quickly loss costs respond.

How the proposals map to insurer outcomes

One place bullet points belong: questions insurance leaders should be asking now

• Which elements would change loss costs fastest, fraud enforcement, non-economic damages, or the serious injury threshold, and how will we measure it quarter by quarter? (Governor Kathy Hochul)

• Do our SIU workflows, vendor partnerships, and medical-provider oversight strategies align with a more prosecution-oriented state posture on organized fraud? (Governor Kathy Hochul)

• If claim severity drops, how quickly will regulators expect premium impacts, and what will DFS consider persuasive evidence in rate filings? (Governor Kathy Hochul)

The bottom line

New York is signaling that auto insurance affordability will be pursued through structural change, not just enforcement headlines. The proposals target the parts of the system where loss dollars compound: staged crashes, litigation incentives, and the gray areas that turn minor injuries into major costs.

For the industry, this is less about a single reform and more about the combined effect of several coordinated edits to the risk and legal environment. If even a portion of the package advances, carriers operating in New York should expect a shifting playbook in fraud detection, claim valuation, and the regulatory expectations that follow any improvement in results.