New Jersey Introduces Legislation to Reform Auto Insurance Territory Maps
New Jersey has taken a significant step towards reforming how auto insurers assess risk by introducing legislation that requires a complete overhaul of their territory maps. Assembly Bill No. 5846, sponsored by Assemblyman Craig J. Coughlin and introduced on June 16, 2025, mandates that all auto insurers and rating organizations in the state implement a new territorial rating plan for private passenger automobile insurance.
The bill requires insurers to redraw their rating territories using contiguous zip code+4 areas that closely follow municipal boundaries. This represents a significant shift from the current limit of 50 territories defined by zip codes to a new maximum of 100 territories per map. The newly drawn territories must adhere to specific regulatory criteria, including traffic density, population density, severity of loss, driver classifications, and trip patterns both within and across territories.
The legislation emphasizes that every rating plan must be designed to promote fairness and avoid arbitrary or marketing-driven territory creation. The bill explicitly states that “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.”
To ensure the new territory maps meet these criteria, insurers are required to:
- Exclude losses attributable to capped driver classifications
- Consider recoveries through subrogation when reporting territory-level experience
- Justify that there is no unfair inter-territorial subsidization, where low-risk regions bear the burden for high-risk ones
The Commissioner of Banking and Insurance is tasked with establishing supporting regulations and setting statistical standards for the new territory maps. Insurers must ensure that territories contain a statistically credible number of exposures and are designed to minimize year-to-year variability in loss.
The legislation is set to take effect 120 days after enactment and will apply to all territorial rating plans filed thereafter. If passed, this bill is expected to significantly reshape how risk is geographically priced in New Jersey’s auto insurance sector and may influence similar reforms in other states.
