A Citizens Advice investigation has found that people of colour may be paying an “ethnicity penalty” of at least £280 a year in higher car insurance costs.
The England and Wales charity carried out a year-long investigation and found that, on average, people of colour paid £250 a year more than white people.
The Association of British Insurers (ABI) disputed the investigation’s findings and said “insurers never use ethnicity as a factor when setting prices”.
As part of the investigation, Citizens Advice analysed 18,000 car insurance costs reported by people who came to the charity for debt help in 2021 and found that people of colour paid an average £250 more for car insurance regardless of gender, age, and income.
The charity also commissioned research agency Europe Economics to carry out 649 mystery shops using six personas across eight postcodes.
In postcodes where more than 50% of the population are people of colour, the charity found an “ethnicity penalty” of at least £280 a year. Areas with a higher proportion of people of colour had an even higher penalty.
According to Citizens Advice, the average car insurance quote in a low-crime area where most of the population were people of colour was more than double that in a largely white area with a much higher crime rate.
Citizens Advice is now calling on the Financial Conduct Authority (FCA) to set out how insurers must prove they abide by the Equality Act 2010, as well as require them to audit and account for their pricing decisions.
The charity warned that although insurers do not collect information about ethnicity, “the volume of data now available means there is a real risk that other data can be used as a proxy for the ethnicity of customers”.