New York Enacts Sweeping Auto Insurance Reforms; State Farm CEO Wants Proof Before Expanding

New York has enacted a landmark package of auto insurance reforms aimed at tackling one of the most expensive auto insurance markets in the United States, where drivers pay an average of approximately $4,000 per year — nearly $1,500 above the national average. Governor Kathy Hochul signed the reforms into law in late May 2026 as part of the state's $268.5 billion FY27 budget, after months of contentious negotiations that pushed the budget more than a month past its April 1 deadline.

The reform package, which the Citizens Budget Commission projects could reduce a typical New York driver's premium by roughly 10% (about $200 per vehicle per year), includes several key measures. It tightens the statutory definition of 'serious injury' to limit pain-and-suffering lawsuits to those who can objectively demonstrate serious harm, caps non-economic damages for drivers engaging in criminal behaviour such as drunk or uninsured driving, modifies comparative negligence law, and creates criminal penalties for individuals who organise staged accidents — not just the drivers behind the wheel. The budget also includes consumer protections prohibiting auto insurers from basing rates on homeownership status, occupation, education level, or zip code, and requires insurers to return excess profits to policyholders.

Notably, a proposal supported by some insurers that would have extended the time to investigate suspected no-fault fraud from 30 days to 60 days was not enacted, leaving the existing 30-day framework in place. A change to joint and several liability proposed by Hochul also did not pass.

Speaking at the S&P Global Ratings 42nd Annual Insurance Conference in early June, State Farm CEO Jon Farney welcomed the reforms as a positive 'first step' but struck a cautious note about the company's plans. 'We want some proof before we move too hard or too fast there,' Farney said, adding that State Farm would 'see how this plays out rather than being too proactive'. The caution reflects the sting of past losses in New York: insurers reported losing 17% on auto insurance in the state in 2023. State Farm has highlighted that New York drivers received just 4% of its $5 billion cash-back dividend relative to premiums, compared with 10% for drivers outside the state — a reflection of New York's elevated claims costs. Supporters of the reforms, including the American Property Casualty Insurance Association, point to the success of similar measures in Florida and Michigan.