Hundreds of thousands of people of color could pay an ‘ethnic penalty’ of at least £280 a year each in higher car insurance costs, a Citizens Advice survey has found.
The national charity said its year-long investigation found a “shocking trend” of people of color paying far more for car cover than white people, and the fine could be as high as £950 in some places.
However, the insurance industry’s leading trade body disputed the report’s findings, saying insurers had “never” used ethnicity as a factor when setting prices.
Working with research agency Europe Economics, Citizens Advice conducted 649 mystery shops for car insurance quotes using six different customer names across eight postcodes in England. The goal was to compare areas with high white populations with those where there was a high proportion of people of color.
The charity estimated that 754,000 people of color held car insurance policies and lived in areas affected by the alleged ethnic sanction.
Citizens Advice said it found that in some areas “the difference in price was over 100%”, and common risk factors such as crime rates and levels of deprivation could not account for this. “We are concerned that this suggests that areas with large communities of color may be identified as more risky, even when objective risk factors are controlled,” he said.
It found that citations in areas with a high proportion of black or South Asians were at least £280 higher than citations in largely white postcodes, but the ethnicity penalty was “up to ‘to £950 in some places’.
In Bristol – the location of two of the postcodes – an area with a population of 41% black and 18% South Asian produced an average quote for a Vauxhall Corsa of £283 – or 51% – higher than that of a neighborhood less than three kilometers away with an 87% white population. “This is despite the white area having a higher relative crime rate,” the report said.
For ‘customers’, the researchers chose names often associated with certain ethnic groups, although Citizens Advice said these ultimately didn’t have much of an impact on the prices quoted. “This suggests that this penalty is paid by everyone who lives in an area, regardless of their ethnicity. However, people of color are [statistically] much more likely to pay it,” he added.
Separately, the charity analyzed 18,000 car insurance costs reported by people who asked it for help paying off their debts in 2021. It said it found that, on average, people of color paid £250 a year more than whites.
Possible links between insurance and ethnicity have already been highlighted: in 2016, a report co-authored by former equality commissioner Trevor Phillips claimed that millions of people living in high-density areas households belonging to ethnic minorities paid an “ethnic minority penalty”. up to £450 a year in higher car premiums.
Responding to the latest findings, James Dalton, director of general insurance policy at the Association of British Insurers, 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 auto insurance.
He added: ‘Insurance is priced according to individual risk levels, and many risk factors are used to calculate the price…but ethnicity is not one of them.’