2026 New York State Budget & Auto Insurance
As part of New York State’s annual budget, Governhor Hochul is looking to pass legislation that would limit the so-called “fraudemic” of “bogus” personal injury lawsuits, which she claims has led to increasing auto insurance premiums throughout New York State in recent years. One of the main arguments in favor of passing such legislation is that auto insurance carriers are forced to pay on fraudulent claims while taxpayers are left to pick up the tab. Advocates in support of the proposed legislation argue that working class families will enjoy a savings as fraudulent claims have dramatically increased insurance rates through “enormous” payouts. That is simply not the case nor the whole story.
The fact of the matter is that insurance carriers have been allowed to run rampant as they increase insurance costs with limited accountability and continue to see record increases in their profits year-over-year. The Governor’s attempt to combat fraudulent claims by imposing new legal liability for “criminals orchestrating staged accidents” is admirable, but this is merely one facet of the changes being proposed.
One of the most concerning aspects of the Governor’s proposal is the tightening of the serious injury threshold by requiring “objective and fair medical standards for what qualifies as a serious injury.” In theory, this would help weed out fraudulent and baseless claims, however the current iteration of the serious injury threshold already requires that a legally defined “serious injury” be supported by objective medical evidence. Contrary to the Governor’s position, the serious injury threshold has frequently been used by insurance companies to deny an injured party’s claim. In fact, in response to the Governor’s proposal, an independent research organization conducted a study and found that New York auto insurance companies currently close nearly half of all liability claims without making any form of payment. More specifically, the findings showed that 48.3% of auto liability claims were closed as “flat-out denials”, which represents a significant increase since 2005 when approximately just one-third of all claims were closed without payment.
Make no mistake, insurance companies continue to do big business within the confines of New York State as it remains just one of two states with no active laws promoting transparency. This lack of transparency has allowed insurers to deny claims and deny payments with little accountability. Some argue insurance companies are incentivized to deny or delay payments, as they generate income and profit from their investment of policyholders’ premium payments. Throughout her incumbency, Governor Hochul has allowed insurers to raise costs well beyond what is permitted under New York’s flex-rating system and now seeks to further strip away victims’ rights so that the insurance companies can pay out even less while making covered individuals pay more. Understandably, those not standing to gain from the Governor’s proposal universally agree that the focus should be on reining in the insurance companies instead of reducing the rights of consumers and injured parties alike.