Hank Stern at Insureblog has a great historical map of the US which shows different underwriting zones. Broadly speaking, the further east you were, the less you paid. But check it out, it's a great window on America's past through the eyes of insurance underwriters.
Hank says he hadn't thought about it - but of course the world is a series of geographical insurance zones - although these usually map to nation states there are examples of sub-national ones. In the UK, for example, annuities are offered that vary according to region. There are also super-national regions, an underwriter we're working with which is based in the US but offers product around the world assigns countries to five different zones - six if you count the category of countries insured's cannot live in and apply for cover.
Incidentally, the whole concept of geographical underwriting leads us to some interesting places, and exposes some of the shortcuts we take in underwriting terms, admitting some risks to pools for which they can't really qualify, if we take a step back. Here are two examples:
If you grew up in rural China, for example, but were fortunate enough to make it to New Zealand your mortality will surely improve quite a lot, but some things you will carry with you from your nutrition and treatment as a child - but you'll be rated as a Kiwi nonetheless.
On the other hand if you were the child of millionaire business tycoon parents you may have enjoyed better care, nutrition, environment and health than 99% of all Kiwis. But if all this happened in Mumbai your life insurance rates will incorporate allowances for the rest of the Indian national population. Bad luck. But at least you can afford to subsidise the rest.
One insurer I know of asks three geographical underwriting questions:
- 1. Where do you live and work now?
- 2. Where were you born?
- 3. What is your main country of citizenship?
They think it makes a difference. Given that 50% of Auckland's population were born somewhere other than New Zealand, maybe we should think about it too.