Living within the wrong postcode can end up costing consumers dearly when it comes to things such as pensions, healthcare, home insurance, and motor car insurance, experts say.
A large part of the issue is that car insurance companies have to estimate the kinds of risks a given policyholder faces, which then informs the risks they are taking by providing that policyholder with insurance. While insurers had used things such as age and gender in the past, geographical factors such as postcodes have begun to eclipse older risk assessment methods.
Insurance providers have begun to set greater store in where you live. The results are that customers living in select areas could end up seeing increased car insurance rates.
Both car and home insurance are impacted by geographical data such as neighbourhoods with high crime rates. Customers living in areas with high levels of crime will see higher premium prices since both homes and cars are more likely to be burglarised, vandalised, or outright stolen in the case of vehicles.
Pension annuities are also affected by postcodes, as pensioners who live in more upmarket areas are expected to have longer lives. As a result, annuity firms estimate that pensioners in these areas will be taking their pensions for longer periods of times, which means smaller monthly pension payments than those who live in less desirable areas – and this can sometimes result in the thousands of pounds’ worth of difference annually.
Mortgages and loans are also influenced by postcodes. If your postcode has more people who have defaulted on loans than the national average, you may experience difficulties in securing a loan such as exorbitant interest rates or lenders flat-out refusing to offer you funds at all.
Education is also influenced by postcodes, as it could spell the difference between a failing state school or a better one which is massively oversubscribed. Parents who cannot bear to send their child to a failing school could end up seeing the costs of educating them rise in excess of £30,000 as a result.