Car insurance postcode lottery can make costs FOUR TIMES higher

Car insurance postcode lottery: We reveal how insurers charge up to FOUR TIMES as much to cover the same car in East London as rural Shropshire

  • Insurers can quadruple the cost of motor cover purely based on your postcode 
  • These firms can also hike excesses, adding to the cost of making a claim
  • Even shopping around might not help, as many insurers ignore some postcodes 

Drivers face an insurance postcode lottery that can see them paying up to four times as much for car insurance premiums depending on where they live, This is Money’s analysis has revealed. 

The problem does not end with premiums either, as if you are in a ‘risky’ area many insurers also charge high unavoidable excesses – the cash you have to pay before a claim is paid out.

A motorist’s location, as well as other factors such as driving history and vehicle type, all affect how much drivers pay.

Insurers keep a tight lid on exactly how they set their premiums, arguing that this is commercially sensitive information.

But it is known that, when it comes to where you live, insurers consider factors such as theft risk and the statistical chance of floods and crashes in order to set premiums.

Don’t bank on it: Cheap premiums and choice of insurer can depend on where you live

So to give a sense 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 several different postcodes.

These ranged from Newham in East London, the place with the UK’s highest premiums, all the way to the rural village of Hodnet in Shropshire – voted the poshest in the UK. 

We also included the expensive West London region of Chelsea due to its high proportion of expensive vehicles.

Unsurprisingly, drivers in the East London postcode pay the highest premiums – by as much as 3.94 per cent, in the case of the Land Rover Discovery, where insurance costs range from £759.71 to £2,999.73.

But it is not just premiums that go up depending on where you live – your compulsory excess can too.

That is something often overlooked by consumers buying car insurance, which is often done based on the premium price.

How car insurance premium quotes vary by postcode 
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   
Vauxhall Corsa  £1,075.47  £851.22  £560.45   
Volkswagen Golf  £955.80  £823.64  £569.85   
From GoCompare, all quotes the cheapest available 

Much like the premium example above, people living in postcodes seen as riskier by insurers tend to pay higher excesses.

But that is not true across the board. For example, our example driver insuring a Ford Focus would pay an excess of £150 in East London – the ‘riskiest’ area we tested.

That excess rises to £350 for both West London and Shropshire. 

For other cars, compulsory excesses stay the same regardless of the location. 

How insurance excesses change depending on 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 the cheapest available 

Another factor that varies depending on where you live is the number of insurers prepared to give you a quote.

More quotes equals more competition, which normally means a greater chance of a consumer getting a lower price.

But for every car we tested, the number of insurers prepared to give a quote dropped hugely depending on how risky an area is perceived to be. 

Someone insuring a Range Rover in Newham would have a choice of just four insurers, for example, while the driver in Shropshire would have 16.  

How number of car insurance quotes varies by postcode 
Car East London West London Rural Shropshire   
Ford Fiesta  30 38  42  
Honda Jazz  27  31  46   
Vauxhall 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  11  16   
From GoCompare

A spokesperson for the Association of British Insurers trade body said: ‘Your postcode may impact on the cost of your motor insurance, for example reflecting the vehicle crime rate where you live. 

‘But it will be one of many factors that an insurer will consider – such as your age, claims record and type of vehicle – when assessing your risk.

‘You may not be able to do anything about where you live, but motor Insurance is competitive, so you can shop around to get the best motor insurance deal for your needs.’

> Read This is Money’s guide to cutting the cost of car insurance