Car insurance is expensive in New York because bad drivers stress the system by being allowed to carry basic minimum coverage — but state lawmakers won’t address this problem because they’re afraid to be seen making life more expensive, even for the drivers who endanger us the most.
In New York, the insurance system faces a structural issue: In order to keep driving, the worst drivers must pay very high insurance premiums, but they only get the bare minimum in coverage: $10,000 in liability coverage for property damage, $25,000 for injuring one person and $50,000 per incident. As a result, the worst drivers — the ones most likely to get into a fatal or injury-causing crash — don’t have enough coverage.
Raising these minimums could make sure victims are covered, but experts say that doing so would push some people out of the market entirely, ironically creating more uninsured drivers.
Experts say it’s a symptom of an industry that isn’t really looking out for people, and the state Legislature’s disastrous attempts to reform the system this year represented a fear of taking on that industry.
“The system itself is based on wealth extraction rather than fairness,” said Chuck Bell, advocacy programs director at Consumer Reports. “So I don’t know it would be easy for the governor to change it, because I’m sure she’d be afraid, [and] they should be afraid, of backlash.”
Everybody in the ‘pool’
New York’s worst drivers are often denied coverage from most carriers because their driving records carry too much risk, but it is illegal to drive without insurance in New York, so New York created a database of such drivers called the assigned risk pool. Drivers in that category are divided among the insurance companies, which must insure these drivers as a condition of operating in the state.
This kind of insurance isn’t cheap: drivers can pay $1,000 a month for that minimum coverage. Requiring more coverage than that low minimum would be even more expensive — and lawmakers are spooked at the idea of making life more unaffordable, even for the worst drivers.
“It’s tough, right? … Some people need to drive to be able to get to work. We don’t want to limit people’s ability to be able to earn income if they have to drive,” said state Senate Insurance Chair Jamaal Bailey (D-Bronx).
But there is some interest in doing so; Assembly Member Alicia Hyndman (D-Queens) has a bill (A2189) that would raise minimum coverage to $250,000 per person and $500,000 per incident. Of course, given the weight of cars and the speeds at which some people recklessly pilot them, even minimum coverage that’s 10 times higher than they are now probably won’t be enough, experts said.
“There is never going to be a minimum limit that’s going to be high enough to address every crash,” said Doug Heller, director of insurance at the Consumer Federation of America. “But there is a recognition that if limits are too low, there will be too many crashes where people are underinsured.”
The Insurance Information Institute found that 8.6 percent of drivers in New York were uninsured and another 13.4 percent were underinsured. Their presence on a road has the potential to seriously impact New Yorkers.
In practice, this could look like a Schenectady resident who was driving an SUV getting T-boned on their driver’s side by a motorist with minimum coverage. If that driver needs to go to the hospital for emergency surgery, for say broken ribs and a broken pelvis, their hospital bill could easily reach $150,000. Then there is the matter of their likely totaled car, which could easily have a value of $35,000.
All drivers get the automatic $50,000 in post-crash coverage under the state’s no-fault policy, but that amount of compensation hasn’t been raised since 1996.
And after no-fault insurance and the driver’s minimum coverage, the crash victim would be left with bills and lost value totalling $100,000. In a perfect world, the rest would be covered by their own auto and health insurance, but in some cases, they would be left seeking damages from the person who hit them.
Then there is the matter of what these underinsured drivers do to everyone else’s costs. Every driver’s insurance policy prices in the cost of uninsured and underinsured drivers via Uninsured Motorist & Supplementary Uninsured/Underinsured Motorist insurance. It covers $25,000 for bodily injury per person and $50,000 perr crash. If their collision coverage is large enough, their insurance could cover the costs.
But then the insurer will turn around and sue the driver who was at fault for the costs. That litigation and investigation costs money, which they ultimately try to recoup through the premiums everyone pays. It is a similar story with no-fault insurance, which costs insurance companies each time it is used.
This all contributes to average insurance costs of $1,935 per household a year, as recently as 2024.
Heller noted that often, un- or under-insured drivers are failing to comply with the legal requirements as part of a Dickensian pragmatism: If you only have money for food or for auto insurance, most people would fill their bellies.
Where Hochul failed
Lawmakers entered this year with affordability as a top priority, and Gov. Hochul honed in on auto insurance to find New Yorkers savings. However, she and the state Legislature landed on an agreement that seeks those savings on the backs of New York’s crash victims, rather than by regulating the industry.
Their deal includes narrowing the state’s definition of “serious injury,” which entitles victims to seek damages for pain and suffering beyond the paltry $50,000 covered by no-fault insurance (a limit that hasn’t been raised since the 1970s, so if it had kept up with inflation, should be more like $329,000).
Currently, the term “serious injury” includes fractures, permanent loss of an organ or member, loss of a fetus, or a medically determined non-permanent injury that keeps one out of work or struggling to go through their day-to-day lives for more than 90 days.
Hochul’s plan would disqualify people in that last category — which would have a dramatic effect on crash victims with traumatic brain injuries or soft tissue injuries because they don’t neatly fit the remaining definitions, according to the New York State Trial Lawyers Association.
She also succeeded in changing the system so that drivers who are found at least 51 percent responsible for a crash get no compensation at all beyond automatic no-fault insurance.
The final deal includes some other things that lawmakers demanded: Insurance companies will no longer be able to set rates based on seemingly irrelevant factors such as if a driver is a renter or a home owner, occupation, education level or ZIP code, according to the governor’s office. For lawmakers with districts that have a high density of people of color, or with a high baseline cost of living, effectively all of New York City, Long Island and the lower Hudson Valley, the change was huge. And insurance companies will no longer get to raise rates by 5 percent automatically (not that Big Insurance is struggling — in 2024, before “affordability” became a national buzzword, Hochul raised premiums 21 percent.)
But Streetsblog’s reporting found that the savings achieved by these changes were more hope than anything else, and the governor has already conceded that if everything in her plan goes correctly — like the part where insurance companies save so much money from her changes that they can then pass it on to consumers — it would only save around $25 a month.
And this is as safe driving rebates and pay-per-mile insurance plans remain an underutilized avenue for savings in New York.
Once state lawmakers pass the budget, they’ll have created a world where the New Yorkers on the shakiest financial footing, who have the bad luck of being hit by an underinsured, reckless driver, will have to contend with limited coverage from the driver who hit them and limited recourse, in some cases, to seek damages.
“This is a market that is annoying for everybody,” Heller said, “but nearly impossible for some. And the question is, when the problem is, it’s nearly impossible for some, how can the right response be to just punish that group more? That’s not the right response, right?”
Based in New York, Stephen Freeman is a Senior Editor at Trending Insurance News. Previously he has worked for Forbes and The Huffington Post. Steven is a graduate of Risk Management at the University of New York.