Insurance Circular Letter No. 3 (2026)
July 1, 2026
TO: All Insurers Authorized to Write Motor Vehicle Insurance in New York State, the New York Automobile Insurance Plan, and Rate Service Organizations
RE: 2026 Motor Vehicle Insurance Reforms
STATUTORY AND REGULATORY REFERENCES: N.Y. Insurance Law §§ 2304(b), 2305(c), 2350, 5102(d), and 5104 and Articles 23 and 51; N.Y. Penal Law § 176.05; N.Y. CPLR § 1411(b); and 11 NYCRR 163
I. Purpose
The purpose of this Circular Letter is to advise all insurers authorized to write motor vehicle insurance in New York State, the New York Automobile Insurance Plan, and rate service organizations (collectively, “Addressees”) of changes to the Insurance Law, Penal Law, and Civil Practice Law and Rules (“CPLR”) affecting motor vehicle insurance, and to ensure that Addressees reflect the impact of these reforms in all pending motor vehicle insurance rate filings by August 31, 2026 and in all future motor vehicle insurance rate filings (including pending and future filings subject to flex rating under Insurance Law § 2350) submitted to the Department of Financial Services (the “Department”).
II. Discussion
A. The Reforms
Chapter 55 of the Laws of 2026 (“Chapter 55”) was signed into law on May 27, 2026, and Chapter 58 of the Laws of 2026 (“Chapter 58”) was signed into law on May 26, 2026. Chapter 55 and Chapter 58 amended the Insurance Law, Penal Law, and CPLR to address drivers of rising costs affecting motor vehicle insurance premiums, including fraudulent and abusive claims practices, and to ensure that insurers obtain prior approval before increasing motor vehicle insurance rates. Chapter 55 and Chapter 58 amended these laws as follows.
1. Expanded Definition of “Fraudulent Insurance Act”
Part F of Chapter 55 amended the definition of “fraudulent insurance act” in Penal Law § 176.05 to include a person who hires, requests, encourages, orchestrates, or invites another individual to stage a motor vehicle accident. The law deems such person to have wrongfully taken, obtained, or withheld the full amount of loss to the victim or victims of the fraudulent insurance act. Part F took effect on May 27, 2026.
2. Serious Injury and Non-Economic Damage Amendments
Part EE of Chapter 58 amended Insurance Law §§ 5102(d) and 5104 and CPLR § 1411 as described below. These amendments took effect on May 26, 2026, and apply to all actions and proceedings commenced on or after May 26.
a. Revised Definition of “Serious Injury” and Procedural Sequencing
Part EE amended the definition of “serious injury” set forth in Insurance Law § 5102(d) to delete the part of the definition that referenced a medically determined injury or impairment of a non-permanent nature that prevents the injured person from performing substantially all of the material acts that constitute such person’s usual and customary daily activities for not less than 90 days during the 180 days immediately following the occurrence of the injury or impairment.
Part EE also amended Insurance Law § 5104(a) to require that, in any action to recover damages for non-economic loss pursuant to Insurance Law Article 51, liability for non-economic loss cannot be fixed unless and until the trier of fact has determined the existence of a serious injury. The trier of fact must first determine the party or parties at fault before determining whether an injury is a serious injury.
b. Cap on Non-Economic Damages
Part EE added a new Insurance Law § 5104(d) to impose a $100,000 cap on non-economic damages in any action for a serious injury arising out of a motor vehicle accident that is brought by or on behalf of an at-fault injured person who is not barred from recovery by CPLR § 1411 where the injured person was: (1) operating an uninsured motor vehicle that the person was responsible for insuring under Vehicle and Traffic Law Article 6, except if there is a lapse in coverage of less than 30 days; (2) operating a motor vehicle while impaired1 at the time of the accident and convicted of such offense; or (3) operating a motor vehicle in the commission of a felony, or immediate flight therefrom, at the time of the accident, and convicted of such felony. This cap does not apply in an action for injuries resulting in death.
c. Adoption of Modified Comparative Negligence
Part EE further added a new CPLR § 1411(b) to state that, in any action to recover damages for personal injury subject to Insurance Law Article 51, the culpable conduct attributable to the claimant bars recovery if the culpable conduct of the claimant is greater than the culpable conduct or combined culpable conduct of the person or persons against whom recovery is sought.
3. Flex Rating for Nonbusiness Motor Vehicle Insurance
Part II of Chapter 55 amended Insurance Law § 2350 to prohibit an insurer from implementing overall average rate level increases of up to 5% without the Superintendent’s prior approval, while continuing to permit overall average rate level decreases of up to 5% without the Superintendent’s prior approval.
Part II takes effect on November 27, 2026, and the Department will amend 11 NYCRR Part 163 to conform to the amendments made by Part II. Rate filings submitted prior to November 27 remain subject to the current flex rating provisions under Insurance Law § 2350 and 11 NYCRR Part 163. Additionally, Part II provides that Insurance Law § 2350 will be repealed on May 27, 2030, after which all nonbusiness motor vehicle rate filings will be subject to the Superintendent’s prior approval.
B. Rate Filing Submissions
The amendments made by Part F of Chapter 55 and Part EE of Chapter 58 are expected to deter and reduce fraudulent and inflated claims, moderate claim frequency and severity, and lower loss adjustment expenses for motor vehicle insurance. Further, the amendment made by Part II of Chapter 55 will require insurers to file all nonbusiness motor vehicle rate filing increases for the Superintendent’s prior approval.
Accordingly, the Department expects Addressees to evaluate and appropriately reflect the projected savings or reductions in claim frequency, claim severity, loss adjustment expenses, and any other actuarially indicated reductions, due to the effects of the amendments made by Parts F and EE, in all pending and future motor vehicle rate filings (including filings subject to flex rating under Insurance Law § 2350) submitted to the Department consistent with Insurance Law §§ 2304(b) and 2305(c).
The Department has updated the Rate Filing Sequence Checklist and related instructions by incorporating new Exhibit TR-1 Automobile Tort Reform Calculation, which an Addressee must complete for all pending and future motor vehicle rate filings. The new exhibit requires Addressees to provide:
- the percentage decrease in anticipated claims and loss adjustment expenses resulting from the reforms enacted by Part F of Chapter 55 and by Part EE of Chapter 58; and
- a complete, detailed explanation of how the Addressee derived that percentage decrease, including the specific calculations used and all actuarial processes, procedures, methodologies, and/or assumptions applied.
The Department incorporated these updates into SERFF. Addressees should amend all motor vehicle rate filings currently pending before the Department to include the above-referenced information by August 31, 2026.
III. Conclusion
The Department expects Addressees to review and update their pricing models to align with the reforms described in this Circular Letter. Additionally, Addressees must reflect expected savings in all pending and future motor vehicle insurance rate filings submissions, including the completion of new Exhibit TR-1 Automobile Tort Reform Calculation.
Please direct any questions regarding this Circular Letter by email to [email protected].
1 The impairment language in Part EE is based on Vehicle and Traffic Law § 1192 and refers to an impairment by alcohol or drugs.