Key Takeaway
- New York drivers paying close to twice the national average for auto insurance won’t see reform savings automatically. Insurers must now file actuarial proof that tort-reform savings are priced into every pending and future rate filing, and DFS has made clear it will deny increase requests that skip this step. Shopping your policy in 2026 still makes sense because the competitive response from carriers will vary widely.
What DFS Circular Letter No. 3 Actual Requirements
Every auto insurer writing private passenger policies in New York State got a clear instruction from the New York Department of Financial Services on July 1: quantify the savings from the state’s new tort reforms in your rate filings, or your rate increase request will be denied. That’s not a summary. That’s what DFS Acting Superintendent Kaitlin Asrow said directly to carriers.
DFS published Insurance Circular Letter No. 3 (2026) on July 1, addressed to all insurers authorized to write motor vehicle insurance in New York, the New York Automobile Insurance Plan, and rate service organizations. The circular puts operational teeth into Chapters 55 and 58 of the Laws of 2026. Chapter 58 was signed on May 26; Chapter 55 followed on May 27. Carriers with pending rate filings must amend those submissions by August 31, 2026 to include the new Exhibit TR-1 Automobile Tort Reform Calculation. DFS has updated SERFF to require it. A filing that arrives without it, or that doesn’t show the math, won’t get approved.
Ashrow spelled this out publicly: “We’re indicating to them that if they don’t incorporate those projections, then we will deny their request for rate.”
The circular covers three substantive changes enacted by Chapters 55 and 58. Part F of Chapter 55 expanded the definition of “fraudulent insurance act” under Penal Law § 176.05 to reach anyone who organizes or facilitates a staged accident, not just the person at the wheel. Effective May 27, 2026. Part EE of Chapter 58 tightened New York’s serious injury threshold under Insurance Law § 5102(d), including an outright repeal of the 90/180day category that had allowed minor, non-permanent injuries to qualify for pain-and-suffering suits if they disrupted daily activity for 90 of the first 180 days post-accident. That category has long been cited by carriers as a driver of inflated claims. The same reforms capped non-economic damages at $100,000 for drivers found to be uninsured, impaired, or committing a felony at the time of a crash, and added a modified comparative-fault rule that can bar recovery entirely if a claimant’s fault exceeds that of the defendant.
The circular also flags a coming structural change to New York’s rate approval framework. Starting November 27, 2026, insurers can no longer raise average private passenger auto rates under the existing flex-rating provision without prior DFS approval. Rate decreases of up to 5% can still go through without prior approval. The flex-rating provision that let carriers slip through modest increases without DFS sign-off is gone. Under Insurance Law § 2350, as amended, all non-business motor vehicle rate increases will require prior approval from the Superintendent. That law is set to be fully repealed on May 27, 2030.
What This Means for New York Drivers, and What It Doesn’t
New York drivers pay some of the highest auto insurance premiums in the country. The state has the highest mandatory no-fault PIP minimum among no-fault states at $50,000 per person, a litigation environment that carriers have repeatedly cited in rate filings as a top cost driver, and a fraud ecosystem centered on staged accidents and fraudulent medical billing that runs through the New York City metro area. The reforms are aimed directly at those cost drivers.
Governor Hochul and state lawmakers have projected roughly a 10% premium decrease, materializing over about two years. That’s the political headline. The regulatory reality is more complicated.
Here’s what the circular doesn’t say: carriers aren’t required to file for decreases. They’re required to incorporate projected reform savings into any pending or future rate filings. A carrier asking for a 12% increase must now show how the tort reforms factor into that request, and DFS will evaluate whether the math adds up. A carrier that was planning to file a modest decrease already has less friction. A carrier filing for a large increase faces harder questions. But DFS isn’t mandating across-the-board rate cuts. It’s requiring carriers to show their work.
Rate filings under New York’s prior-approval system already go through a formal review cycle. What’s new is the Exhibit TR-1 requirement embedded in SERFF and the enforcement backstop: a rate filing that ignores the tort reforms gets denied, not reviewed and approved despite the omission. That’s a real change in leverage.
Most renewal letters bury the actual rate change in paragraph three. The headline number on page one is the new annual premium, not the percentage increase, and that is intentional. The circular letter doesn’t fix that. What it does is change the SERFF filing, which is the document underneath the renewal letter. If the carrier’s actuaries can’t credibly model reduced claim frequency and severity from the 90/180 repeal and the staged-accident fraud expansion, they’ll need to defend that position in front of DFS, or amend the filing by August 31.
The practical timeline for policyholders is slower. Insurers need actual claims data to validate actuarial projections. The reforms enacted in May 2026 won’t show measurable claim frequency reductions until late 2026 at the earliest, and realistically, 2027 at the latest. Carriers will project savings now, DFS will scrutinize those projections, and the savings, if they materialize, will flow through at renewal. Existing policyholders will see nothing until their renewal date. New applicants will see the new rate immediately once a revised filing is approved.
The November 27 flex-rating change is a sharper near-term consumer protection. Under the old framework, carriers could implement increases of up to 5% without DFS pre-approval. File and use, essentially. After November 27, every upward rate change requires prior sign-off. That closes a gap that carriers used to bypass through incremental increases in relative obscurity. DFS will now have a formal review opportunity on every increase, no matter how small.
New York drivers who’ve been watching their premiums climb for years should understand what this reform package is and isn’t. The lawsuit that was driving your carrier’s bodily injury severity costs starts running under new rules as of May 26, 2026. The fraudster who organized the staged accident in the Bronx now faces criminal exposure, not just the driver. Those are real changes to the loss environment. Whether they produce measurable premium relief in 2027 depends entirely on whether claims drop and on whether DFS pushes back hard on carriers that project minimal savings. That’s the variable the circular letter doesn’t control.
If you’re shopping for car insurance rates in New York right now, the competitive picture is better than it was two years ago. Carriers that were restricting new business in the state are watching the reform package closely, and some will re-enter more aggressively if early claims data confirms the cost trajectory is improving. The carriers most exposed to fraud and litigation costs in the New York metro area are the ones with the most to gain from these reforms. Watch for competitive filings in late 2026 and 2027 as the first post-reform claims data starts showing up in the actuarial models.
