New Jersey just took a bold swing at how auto insurers assess risk - requiring a full rewrite of their territory maps.
Introduced on June 16, 2025, Assembly, No. 5846, sponsored by Assemblyman Craig J. Coughlin (District 19, Middlesex), would require every auto insurer and rating organization in the state to implement a new territorial rating plan for private passenger automobile insurance.
The bill directs insurers to redraw their rating territories using contiguous zip code+4 areas that closely follow municipal boundaries. This represents a major shift from the current cap of 50 territories defined by zip codes. The new limit: 100 maximum territories per map.
These newly drawn territories must account for a range of regulatory criteria, including traffic density, population density, severity of loss, driver classifications, and trip patterns both within and across territories. Every rating plan must be built in a way that promotes fairness and avoids arbitrary or marketing-driven territory creation, per the bill.
The legislation states: “No territorial rating plan shall result in territories which are arbitrary, unfairly discriminatory, significantly disproportionate in terms of the number of exposures per territory, or created in a manner which is primarily for marketing purposes rather than measuring relativity of exposure to probable loss.”
It also emphasizes that territories must contain a statistically credible number of exposures and be designed to minimize year-to-year variability in loss. The Commissioner of Banking and Insurance is tasked with establishing supporting regulations and setting the statistical standards.
Insurers must exclude losses attributable to capped driver classifications and consider recoveries through subrogation when reporting territory-level experience. And they must justify that there is no unfair inter-territorial subsidization—where low-risk regions bear the burden for high-risk ones.
This bill goes into effect 120 days after enactment, applying to all territorial rating plans filed thereafter.
If passed, the legislation would significantly reshape how risk is geographically priced in New Jersey's auto insurance sector—and may influence similar reforms in other states watching closely.
