As part of a year-long investigation, Citizens Advice analyzed 18,000 car insurance costs reported by people across England and Wales and uncovered some worrying disparities
Hundreds of thousands of people of color may be paying an “ethnicity penalty” of at least £250 a year in higher car insurance costs each, according to Citizens Advice research.
The charity said it had uncovered a “shocking trend” of people from minority ethnic backgrounds Hundreds of pounds a year more for her car insurance as a white man.
As part of a year-long investigation, the charity analyzed 18,000 cost of car insurance tells of people across England and Wales who came to Citizens Advice for debt help in 2021.
It found that people from minority ethnic communities pay an average of £250 more a year than white people, regardless of gender, age and income.
The Association of British Insurers (ABI) said insurers never use ethnicity as a factor in pricing, but acknowledges that the charity’s report “ignites an important public debate”.
Citizens Advice also ran 649 Mystery Shops in England with six personas in eight postcodes.
The majority of personal information submitted online, including car, job and no-claims history, remained the same.
In postcodes where more than 50% of the population is ethnic minority, the charity found a “popular penalty” of at least £280 a year.
The charity claimed that local risk factors such as crime rates, deprivation, traffic accidents and population density could not explain the price differences.
It used population data from the 2011 census to calculate the number of white people and ethnic minorities living in different areas of England.
Citizens Advice said it is urging the Financial Conduct Authority (FCA) to ensure no one pays such a fine in the insurance market.
The charity said that while insurers do not collect data on ethnicity, it fears that with the volume of data now available, there is a real risk that other data could be used as a proxy for customers’ ethnicity.
The data is processed through complex algorithms that are difficult to study, making it difficult to track whether some groups are paying more than others, Citizens Advice said.
The charity wants the FCA to explain how insurance companies must demonstrate compliance with the Equality Act 2010. She said if a company cannot explain ethnic price differences, the regulator must take enforcement action.
Dame Clare Moriarty, chief executive of Citizens Advice, said: “For too long the impenetrability of insurance prices has been simply accepted, but a £280-a-year ethnicity penalty must not continue.
“It’s time the FCA disclosed insurance companies’ pricing decisions and made sure no one was paying more because of protected characteristics like race.
“The use of algorithms has real-world implications for real people. They must be applied with caution and under careful scrutiny by regulators.”
An FCA spokesman said: “We applaud Citizens Advice’s work on this important issue. Their analysis highlights a risk of racial discrimination and raises some potentially challenging questions for insurers.
“Companies must not use data in their pricing that could lead to discrimination based on protected characteristics such as ethnicity, and we have acted where we had concerns, including writing to all insurers outlining our expectations.
“Companies must be able to assure themselves and us that all the risk factors contained in them do not lead to discrimination either.
James Dalton, ABI director of general insurance policies, said: “Insurers never use ethnicity as a factor in pricing and our members comply with the Equality Act. All other evaluation factors are equal, two people of different ethnicity living in the same zip code pay the same premium for their car insurance.
“Insurance is priced based on individual risk levels, and there are many different risk-related factors that go into calculating the price of car insurance that Citizens Advice recognizes should not be viewed in isolation, but ethnicity is not one As the report says, the research was “exploratory and therefore cannot definitively determine what is driving this trend.”
“However, we are aware that this report triggers an important public political debate. Like everyone else, our sector has a role to play in addressing inequalities that exist in society at large and it is an issue we will continue to engage in constructively as an industry.”
https://www.mirror.co.uk/money/drivers-ethnic-minorities-paying-250-26525748 Ethnic minority drivers 'pay £250 more' for car insurance in England