Citizens Advice warns of car insurance ‘ethnic penalty’

Citizens Advice has warned that people from ethnic minorities face price discrimination with their car insurance.

The charity said the ‘shocking trend’ means black and minority ethnic people are paying hundreds of pounds more a year for car insurance than white people.

As part of a year-long survey, it analyzed 18,000 car insurance costs reported by people across England and Wales who came to Citizens Advice for debt help in 2021 .

The charity found that on average people from ethnic minorities paid £250 more a year than white people, regardless of gender, age and income.

The Association of British Insurers (ABI) has said insurers never use ethnicity as a factor when setting prices, but it acknowledges the charity’s report ‘raises an important policy debate public”.

Citizens Advice also carried out 649 mystery shops in England using six people across eight postcodes.

The majority of personal information submitted online, including car, employment and claims history, remained the same.

In postcodes where more than 50% of the population is from ethnic minorities, the charity found an ‘ethnic penalty’ of at least £280 a year.


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The charity claimed that local risk factors such as crime rate, deprivation, road accidents and population density could not explain the price differences.

He used population data from the 2011 census to calculate the number of white and minority ethnic people living in various parts of England.

Citizens Advice said it was urging the Financial Conduct Authority (FCA) to ensure no one pays such a penalty in the insurance market.

The charity said that although insurers do not collect data on ethnicity, it is concerned that the volume of data now available means there is a real risk that other data could be used as indicator of the ethnicity of customers.

The data is processed by complex algorithms that are difficult to review, making it difficult to know whether some groups are paying more than others, Citizens Advice said.

The charity wants the FCA to explain how insurance companies have to prove they comply with the Equality Act 2010. She said if a company cannot explain price differences due to ethnicity, the regulator must take enforcement action.

Dame Clare Moriarty, chief executive of Citizens Advice, said: “For too long the inscrutable nature of insurance pricing has just been accepted, but an ethnic penalty of £280 a year cannot be allowed to continue.

“It’s time the FCA lifted the hood on insurance companies’ pricing decisions and ensure no one pays more because of protected characteristics like race.

“The use of algorithms has real implications for real people. They must be applied with caution, under the careful scrutiny of regulators.

Citizens Advice has warned that BAME people face an ‘ethnic penalty’ with their car insurance. (Photo: PA Wire)

An FCA spokesperson said: “We welcome the work of Citizens Advice on this important issue. Their analysis highlights a risk of discrimination based on race and raises potentially difficult questions for insurers.

“Companies must not use data in their underwriting 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 to let them know our expectations.

“Companies also need to be able to ensure, and assure ourselves, that the risk factors they include also do not result in discrimination. We will continue to review any evidence we receive of concerns over pricing. . »

James Dalton, ABI’s Director, General Insurance Policy, said: ‘Insurers never use ethnicity as a factor when setting prices and our members comply with the Equality Act. All other pricing factors being the same, two people of different ethnicities who live in the same zip code will pay the same premium for their car insurance.

“Insurance is priced according to individual risk levels and many risk related factors are used to calculate the price of a car insurance policy which, as Citizens Advice recognises, should not be considered in isolation. , but ethnicity is not one of them.. As the report states, the research “was exploratory and therefore cannot definitively identify what is driving this trend.”

“However, we recognize that this report raises an important public policy debate. Like everyone else, our sector has a role to play in addressing the inequalities that exist in society at large and this is an issue we will continue to engage constructively on as an industry.

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