Motorists receive ‘ethnic penalty’
A recent study has suggested that motorists living in areas with a high proportion of ethnic minority residents face higher prices for their car insurance.
According to research from Thomson Solicitors, if you own a car and live in an area with a high proportion of ethnic minority households, the chances are you’re being charged higher insurance premium prices – regardless of any other factor.
The report suggests that the impact can push premiums as much as £450 higher than the national average, regardless of the driver’s own ethnicity.
The study said there was a strong statistical link between the proportion of minority ethnic households in an area and the cost of car insurance, and added that the phenomenon existed in well-off and poorer areas.
It concluded that the way insurers calculated their premiums ‘has definitely produced an inequality of outcome to the detriment of BME [black and minority ethnic] groups’.
The report prompted an angry reaction from the insurance industry, with the main trade body, the Association of British Insurers (ABI), saying it ‘makes serious accusations using a flawed analysis’ and was compiled ‘by people with no understanding of how car insurers price their policies’.
Trevor Phillips, one of the authors of the report and the founding chair of the Equality and Human Rights Commission, said there was ‘no hesitation’ linking regions with higher proportions of ethnic minority households with higher premium prices based on the figures provided to the analysis team.
He said: “It is clear from our research that the ethnic penalty exists in all regions and in areas of affluence as well as poorer areas.”
Thompson Solicitors said the study was carried out by analysing data sourced from the AA website for all 125 postcodes areas in the UK.
Data analysts Webber Phillips said there is a ‘strong statistical relationship’ – accounting for 60 per cent of the variation – between ethnic minority prevalence and higher insurance premiums in a postcode.
The study found that the additional cost affects an estimated 12 million people – more than one in five UK residents – regardless of the driver’s own ethnic origin and concluded that the variations cannot be accounted for by prevalence of crime, or fear of crime, available claims data or relative affluence.
In the report, Webber Phillips stated: ‘What we can say with confidence is that the process of premium setting has definitely produced an inequality of outcome to the detriment of black and ethnic minority groups.’
Tom Jones, head of policy at Thompsons Solicitors, which commissioned the research, said: ‘We decided to look into this issue because of the huge variations in premiums across the country and concerns raised with us that there might be a link with ethnicity.”
He added: “This report confirms our fears that the process by which car insurers calculate premiums produces a wholly skewed result.
“It is outrageous that insurers – whether deliberately or through a lack of concern – should allow an outcome that is to the detriment not only of people from ethnic minority backgrounds but anyone else who lives in those areas.”
Last week, the ABI confirmed that the average car insurance premium paid in the second quarter of 2016 was £434, up £5, or one per cent, on the previous quarter and £39, 10 per cent higher – more than the same quarter last year.
Thompsons Solicitors seconded Phillips’ calls for more transparency with a response of its own, adding: “Thompsons commissioned this report as we feared – following an initial review of the available data – that direct or indirect discrimination may be taking place.
“The ABI’s response is to be expected but they do not publish data on the factors they cite as influencing ‘claims experience’.
“Our simple reply to the insurance industry is: disprove our research. Publish your data and be transparent in how you calculate claims.’
However, James Dalton, the director of general insurance policy at the ABI, said the findings were not correct.
He said: “Car insurers have never and will never set prices based on ethnicity, as it is ethically wrong and prohibited by the 2010 Equality Act. Premiums are higher in certain parts of the country because claims costs are higher in certain parts of the country,” he said.
“This report was compiled without any consultation with the insurance industry, by people with no understanding of how car insurers price their policies, and was paid for by a firm of solicitors with a vested interest in fuelling the compensation culture.”
The authors of the report, commissioned by Thompsons Solicitors, said that without access to data held by insurers, they could not rule out the possibility of other factors having a role to play, such as taste in vehicles, the age of the driver and immigration status.