Car insurance quotes were a third more expensive in certain areas of England with the highest minority ethnicity populations, according to findings from BBC Verify, an investigative branch of the organisation.
The research involved collecting thousands of quotes based on identical driver information but with different addresses, revealing that areas with a significant number of people from ethnic minorities experienced higher prices, even when road accidents and crime levels were similar.
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While the insurance industry body asserts that ethnicity is not a factor in pricing, Citizens Advice argues that these findings contribute to evidence of an “ethnicity penalty.”
Car insurance pricing takes various factors into account, including address, age, and driving history, but the specific calculation remains undisclosed by insurance firms.
BBC Verify said it conducted tests by changing a driver’s address while keeping other details constant. Using 6,000 addresses from diverse areas, the study found that car insurance quotes were, on average, 33% higher in the most ethnically diverse parts of England compared to the least diverse.
For instance, a 30-year-old teacher driving a Ford Fiesta faced an average quote of £1,975 in the Princes End area of Sandwell, near Birmingham. In the nearby Great Bridge area, with similar scores for road accidents and crime according to the Index of Multiple Deprivation, the average quote was £2,796. The difference in population diversity appeared to influence the pricing.
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By GlobalDataThe Association of British Insurers (ABI) said that insurers do not use ethnicity as a pricing factor and comply with the Equality Act 2010. However, the ABI acknowledged the importance of the public policy debate raised by these findings.
Concerns about insurance algorithms leading to higher premiums for people from ethnic minorities have been previously raised, with the Financial Conduct Authority (FCA) investigating the issue in 2019.
A 2023 Citizens Advice survey of 15,000 people found that individuals from ethnic minorities were charged 40% more on average than white individuals.
David Mendes da Costa from Citizens Advice urged the FCA to investigate the reasons behind these disparities, emphasising the need for insurers to explain and ensure fair practices. The FCA stated that it is currently reviewing responses from major motor insurers regarding their pricing models and compliance with anti-discrimination laws.
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