BBC Verify has discovered that car insurance quotes were a third more expensive in some areas of England with larger minority ethnic populations. The study collected thousands of quotes using the same driver information but different addresses. Areas with higher numbers of ethnic minorities saw increased prices, even when road accident and crime levels were comparable. The insurance industry denied that ethnicity was a factor in pricing, but Citizens Advice suggested the findings indicated an “ethnicity penalty”.
The study tested the effect of changing a driver’s address on insurance cost, using 6,000 addresses from a range of socio-economic and diverse areas. All other factors, such as the driver’s age, job, driving history, and car model, remained constant.
On average, car insurance quotes were 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 in the Princes End area of Sandwell would pay an average of £1,975, while in the nearby Great Bridge area, the average quote was £2,796. Both areas have similar road accident and crime rates, but Great Bridge has a larger minority ethnic population.
The Association of British Insurers (ABI) stated that insurers do not use ethnicity as a factor when setting prices and comply with the Equality Act 2010. However, they acknowledged that these findings raise an important public policy debate.
Concerns have previously been raised about insurance companies’ algorithms resulting in higher premiums for people from ethnic minorities. In 2019, the Financial Conduct Authority (FCA) found that several companies could not provide details of what factors were considered or how they ensured compliance with the Equality Act 2010. A 2023 Citizens Advice survey also found that people from ethnic minorities were charged 40% more on average than white people.
Citizens Advice called on the FCA to investigate why people of colour are being charged more. If insurers cannot provide an explanation, the FCA should act quickly to end this practice. The FCA stated that it is looking into the concerns and has asked the largest motor insurers to demonstrate how they ensure their pricing models do not discriminate based on ethnicity.
