Where you live matters to insurers

Your location is a major factor. If you live in a city, your premiums will normally be higher. Accident risk is generally greater in urban areas, so that will have a bearing. Theft is also generally higher in towns. And personally injury claims are generally higher in cities. But it goes the other way too, and you can’t really predict which firm is going to swing in which direction. That’s because the data upon which they’re basing their risk assessment is usually out of date.

A big injury spike in 2016, for instance, might not show up until a couple of years later. Insurance firms are generally reactive, not proactive. In other words, when the claims come in for accidents, fires, floods or whatever, they lose money. Then, to claw that money back in the following years, they hike the premiums. So what we’re all paying for are the errors of the past and not necessarily the true risk of the future.

If a firm has over-estimated the risk, however, it can (and usually does) reduce the premiums in successive years, so the price goes down.

Some extra-urban areas are considered poor risks. Imagine, for instance, that in one year four bikers are killed in a particular countryside area. It might be because of a tricky bend with overhanging trees and tree sap all over the asphalt.

So the riders come off and die, or (let's be kinder) they suffer serious injuries. There's a big pay out, and later the council comes along and lops the trees, or erects a warning sign, or does something else to mitigate the problem.

The road is now safe, but the accident spike has been recorded. Then you, being local to that area, get on the phone and look for a new bike policy, and suddenly the premiums are very high.

Now you know how it works.

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