Proposed Insurance Law Amendments Regarding Flex Rating for For-Hire Vehicle Insurance

SUMMARY

The Insurance Law Committee has issued a report recommending clarifying amendments to Section 2328 of the New York Insurance Law, which governs flex rating for for-hire vehicle insurance. The changes aim to address ambiguities introduced in the 2025–26 State Budget, which authorized the Department of Financial Services to regulate rate adjustments without prior approval. The Committee’s proposals seek to reduce regulatory burdens, ensure consistency in rate filings, and expand flex rating to include both rate increases and decreases. These updates would help streamline the insurance process while maintaining consumer protections.

REPORT

REPORT BY THE INSURANCE LAW COMMITTEE 

PROPOSED CLARIFYING AMENDMENTS TO SECTION 2328 OF THE NEW YORK INSURANCE LAW RELATED TO FLEX RATING FOR FOR-HIRE VEHICLE INSURANCE

The Insurance Law Committee of the New York City Bar Association recommends amendments to Section 2328 of the New York Insurance Law to clarify revisions made to the law as part of the 2025-26 New York State Budget.  The enacted Budget authorized the Department of Financial Services to set flex for-hire vehicle insurance coverage rates through regulation. A copy of the Committee’s proposed amendments is attached as an appendix to this report.*

1. BACKGROUND

New York Insurance Law Section 2305(a) establishes the lines of property/casualty insurance as to which premium rates are subject to prior approval by the Superintendent of Financial Services (the “Superintendent”).  Section 2305 contains a deemer provision, for the specified lines of business, to the effect that if the Superintendent does not act on a rate filing within 30 days (which may be extended another 15 days), the proposed rate may be deemed approved.  Insurance Law Section 2328, however, supersedes the deemer provisions of Section 2305 and, previously required prior approval with no deemer for motor vehicle insurance covering losses and liabilities arising out of ownership of a motor vehicle used principally for the transportation of persons for hire, including buses and school buses.

Insurance Law Sections 2305 and 2328 were amended in Part CC of the New York State 2025-26 Transportation, Economic Development and Environmental Conservation Budget Bill (S. 3008-C / A.3008-C) and signed into law by the Governor on May 9, 2025 (Chp. 58)(hereafter “Part CC”). Part CC added to Section 2305 a specific exception to the prior approval requirements with respect to insurance or bonds required by Vehicle and Traffic Law Section 370 (which governs vehicles for hire) for Section 2328. Part CC also made extensive revisions to Section 2328.

As amended, Section 2328 establishes flex rating within certain parameters, allowing the insurer to increase rates within defined bands without obtaining prior approval, in accordance with the conditions set forth in Part CC and as further may be limited in a regulation to be promulgated by the Superintendent.  Flex rating has been used in personal auto filings for some years now pursuant to Insurance Law Section 2350 and also for several commercial lines of business that are not subject to prior approval but would be if the insurer exceeded the bands.  Flex rating has been credited with providing a degree of flexibility in the marketplace.

2. RECOMMENDED AMENDMENTS

a. Section 2328(a) 

Section 2328(a) now requires every property/casualty insurer writing for-hire motor vehicle insurance (other than for buses or school buses) in New York to obtain prior approval of its rates, rating plans, rating rules, and rate manuals applicable to motor vehicle insurance by August 1 and at least every two years thereafter, even if there is no change in the rates, rating plans, rating rules, or rate manuals.  Section 2328 provides that for rates submitted before August 1, 2025, the Superintendent may “approve the phasing in of rates that meet the standards set forth in” Section 2303. (Section 2303 provides, generally, that rates shall not be excessive, inadequate, unfairly discriminatory, destructive of competition or detrimental to the solvency of insurers.)  It is unclear what happens if the insurer does not file within that time.  Will existing rates rating plans, rating rules, and rate manuals become unapproved?  Even if DFS would construe the language as only a mandate on the insurer to refile and that existing rates would continue until DFS takes action on the filing, it puts an unnecessary burden on DFS to approve all of these filings even where there is no change.

Alternatively, 11 NYCRR Part 161 (Insurance Regulation 129) provides that every insurer must file updated rates or a statement that no changes are required, at least once every three years.  This requirement is a filing requirement and does not affect the validity or status of the rates as Part CC may be doing.  The Superintendent always has the authority to require more information or hold a hearing on the rates pursuant to Insurance Law section 2320 (where prior approval is not required) or 2321 (where prior approval is required).

We suggest that the words “for the superintendent’s prior approval” be removed from the first sentence of Section 2328(a), so as to prevent any uncertainty and to reduce the burden on DFS where no changes are being made.  Changes to rates, rating plans, rating rules, and rate manuals are still subject to prior approval in Section 2328(b), subject to Section 2328(c).

b. Section 2328(b) 

Section 2328(b) applies to for-hire vehicles subject to subsection (c) and in all cases for buses and school buses.  Such provision requires prior approval for “changes” in rates, etc.   This could be fixed by removing the words “changes in.” This would clarify that the prior approval requirement extends to initial filings.

It is also unclear what impact, if any, there would be on other types of vehicles considered to be vehicles for hire by the Department of Motor Vehicles, including rental car vehicles and private ambulance services.  The Memorandum in Support accompanying Part CC appeared to be focused on livery, but vehicles for hire are a broader category.^[1]

The new law also seems to address only automobile insurance rates and not rates for surety bonds that are used to satisfy Vehicle and Traffic Law section 370 requirements.

c. Section 2328(c) 

Flex rating for other commercial lines and for personal lines auto insurance allows the insurer to modify the rate within flex bands up and down.  However, the flex here only applies to “increases.”  This would mean that the insurer would have to submit any decrease for prior approval, which seems to defeat part of the purpose of flex rating.  Insurers often choose to lower rates.

We suggest that the language in Section 2328(c) be modified so that every instance of the term “increase[s] [above]” is accompanied by a reference to “or decrease[s] [below],” as the case may be, as provided in Section 2350 for non-commercial auto.

In addition, Section 3426 generally requires notice of between 60 and 120 days for notice of nonrenewal or notice of increased premium of more than 10%.  Section 3426 requires that if such a nonrenewal or increased-premium notice is provided late, the current premium is extended into the new policy period until 60 days have elapsed since notice was given, so that the insured receives the minimum notice.  Now, for the flex rating changes allowed under the Insurance Law, the insurer must provide prior notice of between 30 and 60 days, with apparently no opportunity to send late notices.  This creates the anomalous situation that an insured could obtain a 10% increase with no minimum prior notice, but a 30-60 day notice would be required for a 3% increase, if made under the flex rating provisions (and no notice if the insurer got the rates prior approved).  This is likely to cause confusion and complications.  If it is felt that minimum prior notice is required, then it should apply across the board for all rate increases of 10% or less.

***

The Committee appreciates this opportunity to provide recommendations and would be happy to discuss the foregoing comments with any interested party.

Insurance Law Committee
Paul Zuckerman, Member

September 2025

*Bill draft available upon request