Drivers face car insurance ‘ethnicity penalty’, says Citizens Advice

Drivers from ethnic minority backgrounds are paying hundreds of pounds more than white motorists for their car insurance, according to Citizens Advice.

The charity said there was a “shocking trend” for drivers from ethnic minority backgrounds to pay more regardless of other factors such as gender, age or income and urged the insurance watchdog to investigate the issue.

As part of a year-long investigation the charity examined 18,000 car insurance costs reported to it by people across England and Wales in 2021 seeking debt advice.

It found that, on average, people from ethnic minority backgrounds paid £250 a year more than white people – regardless of their gender, age and income.

It also carried out mystery shopper exercises which found a difference of more than £280 in some cases.

The Association of British Insurers (ABI) insisted that its members never used ethnicity as a factor when setting premium costs but said that the Citizens Advice report raised an “important public policy debate”.

The charity carried out 649 mystery shops in England using six personas across eight postcodes, with details including car, job and no claims history remaining the same in every case.

It found that in postcodes where more than half the population are from ethnic minority backgrounds - based on census data - there was what it called an “ethnicity penalty” of at least £280 a year.

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

It said that while insurers do not actively collect ethnicity data, it was worried that the volume of other data available means there is a risk that data can be used as a proxy for ethnicity. It added that the complexity of the algorithms used to calculate premiums made it hard to track if some groups were paying more than others.

It has now called on the Financial Conduct Authority to ensure insurers are treating all customers equally. Dame Clare Moriarty, chief executive of Citizens Advice, said: “For too long the impenetrable nature of insurance pricing has just been accepted, but a £280-a-year ethnicity penalty cannot be allowed to continue.