Skip to main content

Your #postcode could be costing you more to insure your #car & #house

By 11th August 2016No Comments

Insuring a Ford Focus in Bradford could cost £1,265, but in Truro? That will be a mere £350. And it’s not just cars

E​d Atherton knows he has a fight on his hands every time he renews his annual motor insurance. With a job as a finance and administration assistant and a five-year no claims bonus, he should be a good risk. That he wants to cover a six-year-old VW Passat – a “bog standard family car” – should mean that his premium is unremarkable. The problem Atherton and his wife Jenny have is that they live in Salford, Manchester. When insurers discover this they start ramping up their premium quotes.

Like thousands of motorists across the UK, they are being punished purely because of where their home is – even if they rarely claim on their policy. This isn’t just a problem for drivers: households in high-crime areas also face higher household insurance premiums, while those in flood-prone districts struggle to get cover at all, turning certain postcodes into insurance blackspots.

Atherton admits that his area has its problems – but they are nowhere near as bad as its reputation suggests. This argument cuts little ice with insurers whose risk calculator tools show the Manchester M27 postcode is high-risk.

​“We pay £750 a year to cover our old Passat, whereas friends who live in more rural parts of Lancashire pay a third of that,” Atherton says.

The couple also own a 1957 Land Rover, which poses even more problems. Last year a search on produced quotes ranging from £5,000 to a “frankly ridiculous” £10,000 for one year’s comprehensive cover.

“After a lot of effort I finally covered both cars through specialist brokers Adrian Flux, with the Land Rover costing £175, but that still means we spend more than £900 a year,” he said.

The high prices for certain postcodes are a reflection of a system which sometimes does not adapt to improvements in an area. Mark Rigby, managing director of Insurance Revolution, says insurers take personal factors such as your credit score, driving history and vehicle type into account, but “your postcode can still drive up the price, even if everything else checks out OK.

​The high prices for certain postcodes, such as those in Salford, Manchester, are a reflection of a system which sometimes does not adapt to improvements in an area.
Historical insurance company data may not always reflect the fact that an area has improved through regeneration, perhaps. So what price a postcode? For Justin Smith, who runs an aerials and TV shop in Hillsborough, Sheffield, it is around £100 on his motor cover.

​He recently moved to Oughtibridge and his postcode registration changed from S6 to S35, slashing the annual premium on his Ford Focus from £313 to £220. “I am the same person, with the same driving history and the same car, but the premiums are very different.”

Car importer and exporter Simon Manis, 47, moved out of central Bradford because high motor and household insurance premiums in the area made it too expensive to live there. “I now live in Menston, Ilkley, a leafy suburb of Leeds. It was only on the other side of the Bradford border, but thanks to its low-risk LS29 postcode my premiums fell sharply,” he says.

Figures from show a 40-year-old male motorist with a five-year no claims discount driving 15,000 miles a year in a Ford Focus would typically pay £1,265 for insurance in high-risk Bradford BD1, against an average of just £395 in low-risk Aberdeen.

​ Aberdeen is regarded as low risk by insurers
The loading which comes with different postcodes adds to the bills of drivers. Motor insurance premiums have leapt 17% over the past year, due to rising insurance fraud, costlier repair bills and two hikes in insurance premium tax. Unsuprisingly, London is the priciest city, with average premiums of £1,330, against just £350 in Truro, Cornwall – one of the cheapest.

Ian Crowder at AA Insurance says higher premiums in some urban areas reflect the greater risk of collision, car crime, uninsured driving and “crash-for-cash” fraud. “Whiplash claims are also a problem, particularly in the north-west, north-east and Midlands; we are disappointed that the government seems to have kicked reform into the long grass.”

Complex road systems, heavy traffic, junctions, traffic lights, cycle lanes and roundabouts all contribute to higher accident rates and costlier insurance in urban areas, pushing up premiums.

However, insurance company models can frequently be a blunt instrument according to Paul Sykes, of insurance data specialists Audatex: “You may live on the safest, nicest street, but if your town is seen as risky your quote will still be high.”

We were paying £250 a year for contents cover at one postcode. At our new postcode, a minute away, it was £470
The effect is that honest motorists in some postcodes are effectively priced out of insurance. Many of these will be low income families who simply cannot afford the premiums they are being asked to pay, and will go without.

The Motor Insurance Bureau estimates that 2.8% of all UK motorists drive without insurance, which adds up to about 1m vehicles on the road.

One broker in Bradford contacted by The Observer, who asked not to be named, says local insurance premiums have spiralled out of control: “You can tell how bad it is – we don’t even bother doing quotes as the premiums are too expensive and many insurers don’t offer cover.”

The postcode problem is not limited to motor insurance.

David and Laura Henderson [not their real names] saw their household cover premiums go through the roof after they moved from an apartment in Stratford, east London, to an adjacent block. The couple contacted a well-known national insurance broker and was told none of its underwriters would even give them a quote. “We were paying £250 a year for contents cover at one postcode. Our new postcode was just one minute away, but our premium had leapt to £470,” said David.

​When he explained the flats were virtually identical, the operator blamed the price hike on their new postcode. “It might be down to the new Westfield shopping centre, which has attracted petty crime, but we don’t know for sure.” David and Laura have decided to take their chances and do without contents insurance.

James Walker, founder of consumer rights platform, argues that postcodes are an arbitrary way of setting insurance premiums. “It is unfair to be penalised just because of where you live.” The danger is that many people are priced out of cover. “If, say, somebody is burgled, the cost of replacing their possessions is going to hit them hard,” Walker says.

Steve Chelton, product expert at Swinton Insurance, says other factors affect your home insurance premiums, as well as postcodes: “Age, occupation, claims history, property type and contents value all have an impact.”

He says there are things you can do to lower your premium aside from moving house, such as installing a burglar alarm and five-lever mortice door locks and two-bolt window locks, and joining your local Neighbourhood Watch.

​Flood damage

 Last winter’s floods cost insurers £1.3bn. 

Living in a flood-prone postcode can mean getting household insurance is a stormy affair. Around one in six homes in England and Wales are in danger of flooding, with last winter’s storms Desmond, Eva and Frank costing insurers £1.3bn in total – an average of £50,000 per home, according to the Association of British Insurers.

Retired couple Keith and Pam Dawson of Hemel Hempstead, Hertfordshire, struggled to get buildings and contents insurance after suffering £60,000 of flood damage in February 2014. “This was despite subsequently constructing a new perimeter wall and carrying out other risk improvement work at our own expense,” Keith Dawson says.

Mainstream insurers either turned them down flat or would only offer cover with flood exclusion. The couple contacted specialist broker Fairweather Insurance, which negotiated cover costing £633 a year with a £10,000 excess on any claims.

Kevin Roberts, broker and affinity director at Legal & General, says increasingly “granular” insurance company data should allow insurers to risk assess individual houses with greater accuracy.

“Historically it wasn’t possible to drill down so precisely and some houses that were never prone to flooding were priced the same as those that were almost guaranteed to flood.”

Article care of the Guardian, the original article can be found here ​

Tim Kelly

Tim is a highly qualified Independent Engineer with over 20 years experience as an Engineering Assessor of damaged vehicles.

Leave a Reply

Knights Hosting