What is Rating Territory Auto Insurance?

What is Rating Territory Auto Insurance?

Insurance companies take into account various elements when determining car insurance premiums.

Among these is territorial rating, which relies on the location where a person parks their vehicle, usually corresponding to the registered address of the vehicle owner.

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What is Rating Territory Auto Insurance
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What is rating territory?

Rating territory refers to a system where insurance regulators establish rating parameters based on overall loss data, without divulging additional details to insurance firms.

These ratings are derived from the cumulative losses incurred within a specified geographical area.

What is the top insurance rating?

The AM Best Financial Strength Rating (FSR) scale spans from A++ to D.

Featuring various levels of rating notches denoted by plus (+) or minus (-) signs, indicating nuanced gradations within the company’s rating.

These ratings, in ascending order and inclusive of notches, are A++, A+, A, A-, B++, B+, B, B-, C++, C+, C, C-, and D.

Calculating Territorial Loss-Costs

Insurers determine loss costs based on the cumulative value of all losses attributed to a specific territory.

In instances where a street serves as a boundary between two rating territories, insurers must utilize the lower rating.

As outlined by the Insurance Department, insurers allocate losses to territories based on the location where a vehicle is garaged, rather than where the accident or loss occurs.

For instance, if a resident of Mansfield is at fault in an accident in Hartford, the resulting loss is associated with the Mansfield territory.

Establishing Territories

Territories typically correspond to one or more ZIP codes.

Although regulations in Connecticut forbid insurers from dividing a town or city into multiple territories.

Irrespective of the number of ZIP codes it encompasses (Conn. Agencies Regs. § 38a-686-2).

Insurers are obligated by law to submit territories and their respective ZIP codes to the department for approval of any alterations to the list (CGS § 38a-686(b)(3).

An image illustration of Rating Territory Auto Insurance
Rating Territory Auto Insurance
Source: (Freepik)

Impact of Territorial Rating

In broad terms, territorial ratings tend to elevate auto insurance rates in urban settings while reducing them in suburban and rural areas.

This phenomenon stems from higher loss costs associated with factors like heightened traffic density and accident frequencies in urban environments.

Typically, higher loss costs correlate with elevated premiums.

The adoption of a weighted system, such as Connecticut’s, generally results in lowered rates in urban locales compared to an unweighted territorial rating system.

This occurs because high loss costs in urban areas are offset when combined with the lower statewide loss cost.

Conversely, it leads to increased insurance rates in suburban and rural regions where loss costs fall below the statewide average.


The concept of rating territory in auto insurance serves as a pivotal determinant in the calculation of premiums.

By assessing factors such as geographic location, insurers can more accurately predict potential losses associated with an individual’s vehicle.

Insurers adjust premiums based on risk profiles, ensuring fair pricing for policyholders.

Rating territories affect insurance rates, emphasizing geographic considerations.


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