Carriers Must Explain Premium Increases Under New State Law
One of the auto insurance reforms included in the New York State budget enacted in May (see Part BB) pertained to carrier premium change explanations. The state Department of Financial Services recently published guidance for carriers on these new requirements. In case your clients ask you questions, here are the details:
- The requirement in subsection (a) of the new Section 2356 applies to personal auto and homeowners and/or dwelling policies insuring one- to four-family dwellings.
- The insurer must provide a notice to the insured with the premium bill when the premium for the renewal policy increases by more than 10%. The notice must provide the amount of the premium increase and an explanation for it.
- The 10% increase threshold does not include premium increases resulting from “insured value added” (added vehicles, higher dwelling limit, etc.)
- If the premium increases less than 10%, subsection (b) requires insurers to provide a “prominent notice” with the premium bill. The notice must say, “Policyholders receiving an increase to their premiums at renewal may request a written explanation, including the primary rating factors causing the increase, by contacting their insurers in writing.” The notice must include the insurer’s contact information. This requirement applies to commercial auto policies in addition to those mentioned above.
- If the insured later requests an explanation, the insurer must provide one, “including the primary rating factors causing the increase,” within 20 days.
- “Primary rating factors” include:
- Individual loss history.
- Policy changes, including new or replacement vehicles, new drivers in the household, changes in address, etc.
- Anticipated losses in the rating territory that cause a premium increase.
- Increased loss settlement costs (repairs, medical costs, building supplies, etc.)
- Lastly, if an insurer renews a personal auto policy with lower premium rates because of the reforms in the state budget, it must give the insured a notice crediting the reforms. This is a nod to the legislators and the governor for enacting the reforms.
These requirements take effect on August 24, 2026.
Nothing in the text requires the notices to be sent via U.S. Mail, so carriers may send them electronically with the policyholder’s consent
Both the law’s text and the DFS guidance make it clear that the notice obligations fall on the carrier, not the agent. There should be minimal impact on agents’ work, even for agency-billed accounts.
The most noticeable effect on agencies may be phone calls from clients wondering why they got the notice. We suggest simply explaining that state law now requires insurers to provide these notices when they increase premiums.
Again, this applies only to personal and commercial auto, homeowners, and dwelling policies. It doesn’t apply to other types of commercial or personal lines policies. During the recent hard market, the types of policies covered by this law saw sharp premium increases. This law is an attempt by the state legislature to require insurers to be more transparent when they raise premiums.
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