New York Wants Every Auto Rate Increase Approved Before It Takes Effect. The Rule It Replaces Lets Insurers Raise Rates 5% Without Asking.

New York is proposing to remove the last route by which a private passenger auto insurer can raise rates in the state without first getting permission. The Department of Financial Services announced the proposed regulation on September 9, 2026, alongside Governor Kathy Hochul's office.

What flex rating allows today

New York currently runs a flex-rating framework for private passenger automobile insurance. It lets an insurer implement up to two overall average rate increases without seeking the Department's prior approval, provided the cumulative increase stays within 5%. The filing is made, the rate takes effect, and the Department reviews afterwards.

The proposal removes that latitude. Insurers would have to obtain express prior approval from DFS before implementing any upward change to private passenger auto rates, of any size.

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.

The disclosure half

The regulation is not only about increases. It would also require insurers to notify policyholders when a rate decrease results from the reforms enacted in the Fiscal Year 2027 budget, and to explain the reasons behind rate changes. That is the transparency element the Department has put at the front of its announcement: the state has legislated reforms it expects to lower premiums, and it wants savings to be visible on the renewal notice rather than absorbed silently.

What the budget reforms did

The Fiscal Year 2027 budget package, secured in May 2026, changed several parts of the law that determine what auto claims cost.

• Caps on damages recoverable by drivers who were engaged in unlawful conduct at the time of the accident, including driving uninsured, driving intoxicated, or committing a felony.
• Clarified statutory definitions of the serious injury threshold, so that pain and suffering damages apply to objectively demonstrated serious injuries.
• Limits on comparative fault, preventing a driver found mostly responsible for a crash from suing the victim for excessive damages.
• Legal thresholds intended to prevent excess profits, together with a requirement that insurers seek DFS approval before raising rates.
• A prohibition on setting rates based on homeownership, occupation, education or zip code.

The prior-approval requirement in the proposed regulation implements the fourth of those items. The Department has already taken a first step on the savings question: an earlier circular letter required auto insurers to show, by August 31, 2026, what this year's tort reforms save.

The premium backdrop

DFS puts the average New York auto premium at slightly more than $4,000 a year, close to $1,500 above the national average. The Department has estimated that fraud inflates premiums by up to $300 a year. In arguing for the reforms, the state pointed to Florida, where 2023 tort changes were followed by a 5.6% decrease in average rates and where the largest carrier returned close to $1 billion in excess profits to 2.7 million policyholders in 2025.

Dates

The regulation is scheduled to take effect on November 27, 2026. A 60-day public comment period runs from publication in the State Register, which began on September 9.

This article describes a proposed regulation, not a final one. The comment period has not closed and the text may change before it takes effect.