When people refer to the ‘Postcode Lottery’, they aren’t talking about a fun gambling craze that’s sweeping the country, they’re talking about the effect that your postcode (i.e. where you live) has on the price of insurance policies 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 one of the most important elements of the equation when it comes to insurance; the higher the crime rate, the more likely it is that you’ll need to make a claim.

However, different insurance providers use different formulae to determine their policy 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 will never be exactly sure how much your postcode will influence the price of insurance offered to you.

How it Works

When trying to determine postcode pricing, most insurance companies will consult figures from the various police forces across the country as well as organisations that deal specifically with insurance fraud. As well as assessing crime rates, they will also take into account which areas pose the highest risk of fraudulent claims.

While there are some exceptions, most countries experience higher levels of fraudulent claims coming from large cities than more sparsely populated areas. Consequently, people 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 an area that suffers from a high crime rate, don’t worry. There’s still a variety of things you can do to combat the unfortunate increase in insurance premiums that your postcode carries.

Firstly, a little persistence goes a long way. 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 statistics.

So shop around and don’t just assume that simply renewing your quote is going to be the best deal that you can get. You can even be pleasantly surprised as there are often excellent insurance deals thrown in by vehicle manufacturers as part of car or bike sales so take this into account if you’re looking to trade in or buy new.

Additionally, there are some tips that you should stick to regardless of your postcode as they apply universally to all vehicle insurance providers.

• Estimate your average mileage accurately; the lower it is, the cheaper the insurance will be.
• If you have access to a garage or driveway then park your vehicle there as it is a major plus point for insurance providers.
• 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. Even one conviction will hike the price offered to you by providers and multiple offences could even double it.