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ZIP Codes 'could be removed from insurance process'

Rachel Wheeler Archive
The use of ZIP Codes by insurance companies to help establish premiums across the country could become a thing of the past if a new bill being taken through the Senate is approved.

ZIP Codes are often used by insurance companies to help calculate premiums for individuals, but plans to get rid of this practice could result in higher premiums for people.

According to the Badger Herald, the proposals would prevent insurance companies using postal addresses to determine the cost of premiums for car insurance.

However, such a move could force insurers to raise premiums for people across the country, because they would not be able to use their detailed information that they have from ZIP Codes to decide whether a person's vehicle is at risk of theft or not.

While the aim of the bill is to reduce premiums for those in more crime-ridden areas, it could have the opposite impact because insurers may decide to charge all customers higher premiums in case their vehicle is in a region that is more likely to be at risk of theft.

A good standard of data quality when processing ZIP Code information can be a valuable tool to help insurance firms give motorists the best cover for their vehicle.

Meanwhile, ZIP Code changes have recently been made to address data in two regions in Denver, Colorado, has reported.