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.

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. 

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.  

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