Postcode Lottery – The Impact of your Address on Insurance Costs

Postcode Lottery - The Impact of your Address on Insurance Costs
When people refer to the ‘Postcode Lottery’, they aren’t talking about a fun new weekly nationwide gambling craze, they’re talking about the effect that your postcode (i.e. where you live) has on the cost of insurance that providers will offer you.
Since all insurance is inherently based on risk, it makes sense that insurance companies will look at the area you live in and try to assess the risk of something happening to you that requires you to make a claim. Understandably, an area’s crime rate is the most important element of postcode pricing when it comes to insurance; the higher the crime rate, the more likely you’ll need to make a claim, hence the price of the quote rises accordingly.
However, different insurance providers use different formulae to determine their prices and their criteria changes regularly to reflect the changing state of different areas. This is why it’s known as the ‘Postcode Lottery’ as you can’t ever be entirely sure how much of an effect your postcode will have on your insurance premiums.

How it Works

When trying to determine postcode pricing, most insurance companies will consult figures from the various police forces across the country and the Insurance Fraud Bureau (IFB). As well as assessing crime rates, they will also take into account which areas pose the highest risk of fraudulent claims.
Currently, the IFB’s data shows that areas with a high level of fraudulent claims are invariably in large cities. Birmingham is the current UK top spot for insurance fraud issues, swiftly followed by Liverpool, Manchester, East London and Bradford. Consequently, drivers living in cities will usually have to contend with higher premiums than those living in the country.

How to Make Savings

If you happen to live in a high crime or fraud hot spot, then don’t despair, there are a number of things you can do to combat the increase in insurance premiums that your postcode carries.
Firstly, saving money on car insurance sometimes requires a little persistence. Don’t assume that just because one provider looks unfavourably at your postcode that all of them will. Some insurance companies change their assessment of some post codes very rapidly due to updated crime stats. So shop around and don’t just assume that simply renewing your quote is going to be the best deal that you can get.
In addition, there are some tricks and tips that you should follow regardless of where you live as they apply universally to all insurance providers.

  • Estimate your average mileage accurately; the lower it is, the cheaper the insurance will be.
  • Don’t risk hiking up the voluntary excess too high unless you are an exceptionally careful driver and are sure that you can afford it.
  • Avoid speeding. A single conviction will affect your insurance premium and multiple convictions can more than double it.
  • If you have access to a garage or driveway then park your car there as it is a majorly positive signal to insurance providers.

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