How New York City can drive down rising costs
Despite every local politician extolling the virtues of New York City’s small businesses, small business owners continue to struggle under a plethora of economic upheavals and governmental constraints. Rents are high, competition from online retailers is fierce and the government holds up too many hoops to jump through. Attempts to streamline bureaucracy and reduce punitive fees, particularly under the Adams administration, never seem to amount to much.
But hope springs eternal. The Mamdani administration recently unveiled OPEN for Small Business, a package that includes 50-plus reforms aimed at reducing permits, duplicate paperwork and unnecessary fines. Some of these reforms have already taken effect while others require regulatory, legal and policy reforms.
What Mamdani hasn’t addressed, however, is the relentless rise of business liability insurance, which has been increasing by 10% a year. For some small-business owners interviewed for this article — including bakery owners, retailers and hospitality operators — a single claim was followed by a substantial premium increase (though the effect varies by insurer, coverage and claims history).
The root of the problem is the structural neglect of small businesses in the insurance marketplace. In New York, the “small group” market covers businesses with up to 100 employees. But here’s the problem: Small enterprises lack the bargaining power that larger businesses can take advantage of.
One solution is a bill introduced by Speaker Julie Menin that would establish a first-of-its-kind Office of Insurance Accountability. Intro 685 is moving its way through the City Council with the purpose of providing greater visibility into the insurance marketplace. This office would track deceptive practices and issue recommendations to stabilize insurance costs. On the Max Politics podcast, Menin made the case for this approach by pointing out that greater visibility into insurance premiums has been shown to lower costs. As always, it’s not quite that simple.
Evidence from health insurance suggests that more transparency on rates can help restrain premium increases when paired with strong regulatory review. Whether a city-level transparency office alone would materially reduce small business insurance costs is unclear.
Menin’s insurance-accountability proposal is fine as far as it goes, but it is small-ball politics. It may diagnose the crisis, but it does not change the underlying structure that creates it.
A better idea is for the City of New York to stop trying to fix a broken insurance market on the back end by fundamentally reshaping the small business insurance market on the front end. In another realm, the Mamdani administration has already demonstrated interest in this approach.
Through the City’s Economic Development Corporation, in partnership with the Department of Housing Preservation and Development and the Housing Development Corporation, the City is developing a publicly backed insurance program for affordable and rent-stabilized housing. In June, the Mamdani administration committed $100 million over three years to launch the initiative, which is intended to lower property and liability insurance premiums by at least 20% for a meaningful share of that housing stock. The City aims to insure its first 20,000 homes in 2027.
The same could be done by New York City’s Department of Small Business Services. Such an initiative, however, would be far more effective if New York State first reformed its insurance policies around group pooling, following the lead of states like New Jersey and Texas. If the State modernized its regulations to facilitate broad commercial pooling, SBS could organize businesses into shared purchasing pools while state regulators oversee a mix of suitable insurance options. Public capital could absorb a limited layer of risk, enabling private insurers to offer more stable coverage at a lower price. The larger and more diverse the pool, the more it would spread risk and smooth volatile rate hikes.
Given the importance of small businesses to New York City’s economy, this is no minor matter. According to a recent report from the New York State Comptroller’s office, small businesses in the city account for 3.7 million jobs — 45% of total employment. Meanwhile, the headwinds are only getting stronger. It’s not just general business liability insurance that’s been rising sharply; consumer prices in the New York metro area were 4.1% higher in June than they were a year earlier, energy prices rose 16.2% and rent rose 4.2%.
This is not an argument for the City or State to replace private insurance. It is an argument for public institutions to act as capable partners: setting a mission, convening the market and attaching clear public-interest conditions to public support. If the public helps reduce risk, the resulting gains — in stable premiums, fairer claims practices and stronger commercial corridors — should be shared with the businesses and communities that made that investment possible.
The renowned economist Mariana Mazzucato has been making this case for years. Governments should do more than fix market failures at the margins; they should set a clear public mission, convene private partners, invest where the market will not and shape the rules so that innovation and risk-taking produce broadly shared value. In this case, that means moving beyond transparency and oversight toward building an insurance market capable of delivering stable, affordable coverage to the businesses that sustain New York’s neighborhoods.
