Insurance companies make use of postcode data to assess flood risk
Well, yes, because calculating the likelihood of a postcode experiencing flooding is trivial and cheap compared to calculating the specific risk to each individual property or part thereof.
It will work in, say, the middle of Carlisle where postcodes uniquely refer to a very small area. 45 miles away, the postcode refers to a much larger area.
Well, yes, it will be. However, the vast majority of people live in towns & cities with small post codes, or in the country at an elevation which never floods. Insurance being a competitive industry, it's hardly surprising that they use the cheaper model for calculating their risk.
Since Tesco opened nearby the number of car accidents in my postcode has soared, as have insurance prices. The irony being that neither the vehicle hit nor the vehicle hitting it is ever a local one - its empty headed shoppers competing to be the first to buy TV dinners and pino that are banging into each other, not those of us who live here. It is what it is.