The mayoral election highlighted the fact that increasing numbers of New Yorkers cannot afford the high cost of living in our city. The solutions to the affordability crisis are complicated, but a great place to start is to reform the laws that make New Yorkers pay some of the highest insurance rates in the nation.
Across the board, New York has 15% higher insurance premiums than any other state. Insurance is a major factor in high rents, health care costs, and construction costs. Average claims in New York amount to more than $7,000 per household, which is 67% higher than the national average of $4,200.
But nothing tops the state’s auto insurance premiums, which are 52% higher than the rest of the country and predicted to increase another 7% in the coming year. In the city, Brooklynites pay the most — more than $6,700 a year for full coverage.
Why is insurance so expensive? Start with the fact that, unlike other states, our laws put no limit on what juries can award for pain and suffering.
It’s important to point out that high costs are not a function of price gouging by insurance companies. A 2023 report by public regulators found that auto insurers in New York had a negative profitability of -9.3%, compared to the national average loss of -0.7% for the industry. Reforms will have the benefit of protecting the solvency of insurers and promoting greater competition in the New York market.
When it comes to auto insurance, New York’s no-fault insurance law encourages fraud because it enables drivers and passengers to obtain up to $50,000 per person, few questions asked and regardless of fault. This easy payout is an incentive to stage an accident and inflate medical costs. In 2024, no fault insurance accounted for 75% of all fraud reports received by the state Department of Financial Services, which dealt with 38,000 cases in just that one year.
Florida had the highest auto insurance rates until the state overhauled its tort system in 2023, ending no fault insurance. In just a year, Florida saw a 6-10% reduction in rates and a 23% decline in litigation. Florida’s top auto insurance company gave back almost $1 billion to its policy holders this year and other companies are prepared to follow suit. Similarly, Michigan ended no fault insurance and rates dropped 15%.
Ohio, which has the lowest auto premiums, caps non-economic (pain and suffering) damage at $250,000 — or three times economic damage, whichever is greater. Michigan requires proving impairment and limiting pain and suffering claims to observable injuries.
New York can quickly bring rates down by reforming the no fault insurance law to discourage staged accidents and by taking these additional actions:
- Limit attorney fees to “reasonable hourly rates.”
- Cap personal injury claims and limit the period for filing a lawsuit to two years.
- Require that juries see only the actual amounts paid or owed for medical treatment, so damage awards are aligned with true economic losses, as Florida now does.
- Eliminate or put tight restrictions on third party litigation funding.
Auto insurance is not the only area in need of reform. Insurance represents 7 to 10% of New York construction project budgets, as opposed to a national average of 3 to 5%. New York is the only state that holds property owners and contractors fully and exclusively liable for gravity-related injuries to workers on a construction site, regardless of who is at fault. Average claims for lawsuits filed under Local Law 240 (known as the “Scaffold Law”) are more than $1 million or 4.5 times larger than claims in Connecticut or Massachusetts.
Another contributor to rising insurance costs and excessive litigation is the relatively new business of third-party financing of lawsuits, which have resulted in a 57% increase in U.S. litigation claims over the past decade according to insurance regulators. This practice involves private equity firms bankrolling litigation that used to be carried out on a contingency basis by lawyers who were more careful not to take on cases they might lose. Last year, Albany imposed a 25% cap on interest rates on these loans, but much more is needed.
A comparison with other states makes clear that, when it comes to insurance costs, New York’s affordability crisis is something we can quickly solve. The message from voters is clear: we need to get this done now.
Wylde is president & CEO of the Partnership for New York City.
