According to a recent report by BBC Verify, car insurance quotes were found to be around 33% higher in areas of England that have a high number of minority ethnicities, even though road accidents and crime levels were similar. The analysis was based on thousands of quotes collected for identical driver information, but with different addresses. These findings add to evidence of an “ethnicity penalty”, suggesting that the ethnicity factor is not considered fair by the citizens’ advice, which implies they want to see changes in pricing to eliminate this penalty.
When a person applies for car insurance, the price is determined by factors such as their age, address and driving history. The testing focused on the impact of changing an applicant’s address on the cost of insurance. For this research, 6,000 addresses were selected to view the effect of insurance based on more and less wealthy and diverse areas, with 20 of the most deprived and 20 of the least deprived addresses chosen for each English local authority where all other driver’s information remained the same.
This report highlighted that car insurance quotes were generally higher to those individuals from diverse ethnic areas in the country. For example, if a 30-year-old teacher driving a Ford Fiesta lived in the Princes End area of Sandwell, near Birmingham they would pay an average of £1,975. However, if they lived in the nearby Great Bridge region, which has a higher black, Asian and minority ethnic population, they could expect to pay an average of £2,796, despite having similar scores according to a government measure known as the Index of Multiple Deprivation.
According to the Association of British Insurers (ABI), ethnicity does not play a role in determining insurance premiums. However, they admit that the results of this research may provoke an influential debate in the public policy, and have assured that their members comply with the Equality Act 2010 to prevent discrimination. The Financial Conduct Authority (FCA) has previously raised concerns regarding the use of algorithms by companies that may lead to discrimination against ethnic minorities
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