DFS: Auto Rate Filings Must Adjust For New Reforms
Now that New York has enacted a package of auto insurance reforms as part of the 2026-27 state budget, the New York State Department of Financial Services (DFS) is making it clear what it expects from insurance companies: if the changes are expected to reduce claims costs, those savings should be reflected in future rates.
The state budget, which was completed in late May after lengthy negotiations, includes several provisions aimed at lowering the cost of auto insurance for New York drivers.
In a July 1, 2026, circular letter sent to auto insurance companies, rate service organizations such as the Insurance Services Office (ISO), and the New York Automobile Insurance Plan (NYAIP), DFS outlined the major changes in the new law.
Among them:
- Arranging a staged auto accident is now expressly defined as insurance fraud.
- The law narrows the circumstances under which an injured person may sue for pain and suffering.
- Courts must follow new procedures before awarding pain and suffering damages.
- Pain and suffering damages are capped at $100,000 if the injured person had been driving without insurance for more than 30 days, was driving while impaired, or was committing a felony or fleeing law enforcement at the time of the accident.
- A person who is more responsible for an accident than the other parties involved cannot recover damages in addition to no-fault benefits.
- Insurers may no longer increase auto insurance rates by up to 5% via flex-rating without obtaining DFS approval first.
DFS also told insurers that it expects them to evaluate how these reforms will affect claim frequency, claim severity, loss adjustment expenses, and other claim-related costs. If the reforms are expected to reduce those costs, insurers should reflect those reductions in both pending and future rate filings.
To support that effort, insurers must submit an Automobile Tort Reform Calculation with all pending and future rate filings beginning no later than August 31, 2026. The calculation must estimate the percentage reduction in claims costs and loss adjustment expenses resulting from the reforms and explain the actuarial basis for those estimates.
As insurers complete their analyses and prepare updated rate filings, we expect many of them will inform their agents of any planned rate reductions.
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