Insurance costs could vary by region

We\'ve been hearing about the so-called NHS postcode lottery for quite some time now. Access to drugs and the types of treatments available differs greatly from one part of the country to another. But treatment for serious illness isn\'t the only lottery we have, as there is now proof that the area of the country you live in also has a bearing on your life expectancy.

The Office of National Statistics has released figures that show a huge divide between life expectancy in different parts of the country. There is no scientific evidence, but it has long been suspected that lifestyle is one of the main determinants of life expectancy. One of the triggers for such a suggestion is the high incidence of lung cancer and heart disease caused by lack of exercise and smoking in some parts of the country. For example, Scotland has a higher rate of both of these illnesses so it is no great surprise that Scotland has the lowest life expectancy in the UK.

Such noticeable differences in life expectancy and treatment of illness begs the question, should the insurance industry follow this postcode lottery?

Certain types of cover, such as household and car insurance, have always used postcodes to determine premiums. Pricing of life insurance and critical illness insurance don’t follow quite the same route, though they use the differences in male and female life expectancy and illness incidence as well as smoking in their pricing strategies.

The NHS postcode lottery is unlikely to affect CI as it is about the illness and not the cure. But in the future, if illness is caught early (through better screening) and treated more effectively (with modern medicines) in some parts of the country it might not qualify for a CI claim while in other parts of the country the same screening and medicines might not be available so it could trigger a claim. This could create differences in claims data for different parts of the country.

We now have proof of a link between where you live and life expectancy so this could be used to price life policies. Differential pricing could happen but whether it is worth doing is the question.

The lifestyle differences which are linked to the higher or lower incidence of illness and mortality may also have different take-up rates for the various types of insurance policies amongst the people living in these areas.

There are lots of ways that the industry can go but it is unlikely such a big shift will happen overnight.Nick Kirwan is head of marketing and communications at Infinity Mortgages