Black and Asian people still paying higher car insurance as watchdog accused of being ‘nowhere to be seen’

Black and Asian people are still paying inflated car insurance costs, a study has found, with Citizens Advice accusing authorities of being “nowhere to be seen”.

The charity has reiterated concerns about a “worrying” link between ethnicity and insurance costs as its research found people from ethnic minority backgrounds were paying around £250 per year more on average for their car insurance than white people.

It is estimated that over one million people cancelled their car insurance last year amidst pressure from rising bills with ethnic minority backgrounds being three times as likely to cancel their car insurance than white people.

The charity’s most recent study, carried out in 2022, analysed the car insurance costs of more than 15,000 people it helped with their debts that year. Now, 12 months on, the Financial Conduct Authority has been accused of failing to address the issue.

Dame Clare Moriarty, chief executive of Citizens Advice, said: "This is a truly worrying link between ethnicity and insurance costs, but one year on and the Financial Conduct Authority (FCA) is still nowhere to be seen."

The FCA said it “welcomes” the research from Citizens Advice and it would “raise these concerns with the insurance industry”.

However, it did not outline a clear plan for addressing the disparity.

“People of colour should be treated fairly in the provision of insurance,” an FCA spokesperson told The Independent. “The FCA welcomes the work Citizens Advice has done investigating this issue and has worked closely with them to understand the issues raised.

“Firms are required to comply with the Equality Act and not discriminate and we will continue to raise these concerns and evidence with the insurance industry to ensure that they are serving all customers - whatever their ethnicity – fairly”.

Citizens Advice has carried out previous research which produced similar findings and it said monitoring and clear enforcement action is needed if car insurance firms cannot explain ethnicity pricing differences.

The second part of the research shone a spotlight on eight postcodes, to compare areas where there is a high white population to areas where there is a high proportion of Black and Asian people living.

Everyone who lives in the postcode pays higher prices, regardless of their ethnicity, however, if this trend were to be replicated across the country, the charity found that Black and Asian people would be 13 times more likely to be paying it than white people.

As such, these drivers could be paying at least £213 million a year more on their car insurance.

Citizens Advice further found that common risk factors of crime rate, deprivation, road traffic accidents and population density could not account for the racial difference in price.

A spokesperson for the Association of British Insurers (ABI) said its members comply with the Equality Act and insurers never use ethnicity as a factor when setting prices.

However, like the FCA, they were not able to explain why the racial disparity persists.

"We recognise the important public policy debate that Citizens Advice raised through its report and it’s a matter we’ve continued to discuss over the past year with the charity, across the industry and with the FCA," he 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.

"However, we are clear that our sector has a role to play in looking at how wider societal issues might impact on insurance costs and we’ll continue to discuss it further.

"Our members are also acutely aware of the financial pressures that many households are facing at present and want to help customers wherever possible, especially where third party motor insurance is a legal requirement for drivers. Anyone struggling to pay their insurance premium should contact their insurer to see if they can help."