February 3, 2023


Born to perform

Inquiry urged amid fears people of colour pay more for car insurance

2 min read


A woman calling her insurer after scratching her car

A woman calling her insurer after scratching her car

A charity has called on regulators to investigate following concern that people from ethnic minority backgrounds could pay more for car insurance.

Citizens Advice claims its own investigation found people faced a £280 a year “ethnicity penalty”.

Insurers say ethnicity is never a factor when setting premiums, as such discrimination would be illegal.

But the City regulator said the investigation raised challenging questions for insurers.


The charity analysed 18,000 car insurance costs reported by people across England and Wales who came to Citizens Advice for debt help last year.

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

Using a mystery shopping exercise, it also said that in postcodes where more than 50% of the population were from ethnic minority backgrounds, there was a 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.

The Association of British Insurers (ABI) said insurers never use ethnicity as a factor when setting prices, to comply with the law.

James Dalton, its director of general insurance policy, said: “All other rating factors being the same, two people of different ethnicities who live in the same postcode will pay the same premium for their car insurance.

“Insurance is priced on individual risk levels and there are many different risk-related factors that are used to calculate the price of a car insurance policy which, as Citizens Advice recognise, should not be looked at in isolation but ethnicity is not one of them. However, we recognise this report raises an important public policy debate.”

Citizens Advice said it was concerned that alternative data could be used as a proxy for the ethnicity of customers.

Data is processed through complex algorithms which were hard to examine, it said.

It called on the City watchdog, the Financial Conduct Authority (FCA), to investigate.

“It is time for the FCA to lift the bonnet on insurance firms’ pricing decisions and ensure no one is paying more because of protected characteristics like race,” said its chief executive, Clare Moriarty.

“The use of algorithms has real-world implications for real people. They must be applied with caution, under the careful scrutiny of regulators.”

An FCA spokesman said: “We welcome Citizens Advice’s work on this important issue. Their analysis highlights a risk of discrimination based on race and raises some potentially challenging questions for insurers.

“Firms must also be able to assure themselves, and us, that any risk factors they include also do not result in discrimination. We will continue to consider any evidence we receive of concerns around pricing.”


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