Postcode lottery car insurance: we reveal how insurers charge up to FOUR TIMES as much for car cover in East London, compared to rural Shropshire
- Insurers can quadruple the cost of car coverage based purely on your zip code
- These companies can also incur excesses, which increases the cost of filing a claim
- Even shopping around may not help, as many insurers ignore some zip codes
Drivers face a zip code lottery for insurance, where they can pay up to four times as much for auto insurance premiums depending on where they live, This is Money analysis has revealed.
The problem doesn’t stop at the premiums, either, because if you’re in a “high-risk” area, many insurers also charge high unavoidable deductibles – the money you have to pay before a claim is paid.
A driver’s location, as well as other factors such as driving history and vehicle type, all affect how much drivers pay.
Insurers keep a close eye on exactly how they determine their premiums, arguing that this is commercially sensitive information.
But when it comes to where you live, insurers are known to consider factors such as theft risk and the statistical probability of flooding and accidents to set premiums.
Don’t count on it: cheap premiums and choice of insurer may depend on where you live
So to give you an idea of how where you live affects what you pay for car insurance, This is Money compared quotes for a range of vehicles, keeping everything the same but using different zip codes.
These ranged from East London’s Newham, the UK’s highest premium town, all the way to the rural village of Hodnet in Shropshire – voted the UK’s poshest.
We have also included the expensive Chelsea area of West London due to its high share of expensive vehicles.
Unsurprisingly, drivers in the East London postcode pay the highest premiums – a whopping 3.94 per cent, in the case of the Land Rover Discovery, where insurance costs range from £759.71 to £2,999.73.
But not only the premiums increase depending on where you live, but also your compulsory deductible.
That is often overlooked by consumers purchasing auto insurance, which is often done based on the premium price.
| Car | East London | West London | Rural Shropshire | |
|---|---|---|---|---|
| Land Rover Discovery | £2,993.74 | £2,553.67 | £759.71 | |
| Mercedes E class | £2,136.78 | £2,098.99 | £685.63 | |
| BMW 3 Series | £1,395.95 | £1,072.03 | £646.41 | |
| Honda Jazz | £1,144.33 | £893.46 | £556.84 | |
| Ford Fiesta | £1,113.42 | £884.63 | £560.45 | |
| Opel Corsa | £1,075.47 | £851.22 | £560.45 | |
| Volkswagen Golf | £955.80 | £823.64 | £569.85 | |
| From GoCompare, all quotes are the cheapest available | ||||
As in the premium example above, people who live in ZIP codes considered riskier by insurers tend to pay a higher deductible.
But that is not true across the board. For example, our example driver insuring a Ford Focus would pay a £150 deductible in East London – the ‘riskiest’ area we tested.
That deductible rises to £350 for both West London and Shropshire.
For other cars, the compulsory deductible remains the same regardless of the location.
| Car | East London | West London | Rural Shropshire |
|---|---|---|---|
| Land Rover Range Rover | £1,400 | £1,400 | £650 |
| Land Rover Discovery | £500 | £500 | £350 |
| Volkswagen Golf | £350 | £350 | £250 |
| Honda Jazz | £500 | £500 | £250 |
| Mercedes E class | £350 | £350 | £350 |
| From GoCompare, all quotes are the cheapest available | |||
Another factor that varies depending on where you live is the number of insurers willing to give you a quote.
More quotes equals more competition, which normally means a higher chance of a consumer getting a lower price.
But for every car we tested, the number of insurers willing to quote plummeted depending on how risky an area is perceived to be.
For example, someone insuring a Range Rover in Newham has only four insurers to choose from, while the driver in Shropshire has 16.
| Car | East London | West London | Rural Shropshire | |
|---|---|---|---|---|
| Ford Fiesta | 30 | 38 | 42 | |
| Honda Jazz | 27 | 31 | 46 | |
| Opel Corsa | 27 | 41 | 44 | |
| Volkswagen Golf | 24 | 33 | 34 | |
| BMW 3 Series | 18 | 20 | 26 | |
| Mercedes E class | 16 | 23 | 31 | |
| Land Rover Discovery | 11 | 14 | 22 | |
| Range Rover | 4 | 11 | 16 | |
| From GoCompare | ||||
A spokesman for the Association of British Insurers industry association said: ‘Your postcode can affect the cost of your car insurance, for example reflecting the rate of vehicle crime where you live.
“But it will be one of many factors an insurer will consider — such as your age, claim record and type of vehicle — when assessing your risk.”
“You may not be able to control where you live, but car insurance is competitive, so you can shop around to get the best car insurance for your needs.”
> Read This is Money’s guide to cutting car insurance costs