Citizens Advice has urged the UK financial regulator to investigate possible evidence of an “ethnicity fine” in the car insurance market after the charity found that people of color were paying hundreds of pounds more in premiums than white customers.

In a report published Tuesday, the consumer advice organization highlighted a “disturbing trend” between ethnicity and the cost of insurance that could not be explained when common risk factors were taken into account.

The study analyzed data from 18,000 people who sought debt advice from the consumer group last year, showing that people of color spent an average of £250 more than white people to insure their vehicles, a trend that continued even when researchers adjusted for gender, age and income. .

Citizens Advice also conducted a “mystery shopping” exercise, which found that people living in areas with a high percentage of black or South Asian residents paid at least £280 more for their insurance. That disparity could not be fully explained by differences in deprivation or crime rates, the charity said.

The charity has called on the Financial Conduct Authority to “lift the hood” on pricing models by requiring insurers to audit and monitor results to identify racial disparities and for the regulator itself to assess correlations between profit and racial makeup of local geographies. areas to measure.

Past campaigns by the charity sparked a major uproar in the auto and home insurance markets early in the year, after Citizens Advice complained about a practice known as price-walking, which resulted in so-called loyalty fines where insurers took advantage of luring new customers with low prices and driving up renewal fees.

Matthew Upton, policy director at Citizens Advice, said the evidence in the report should be enough for the regulator and industry to make premium pricing “more transparent from now on”.

The method used by insurers to calculate premiums is notoriously opaque and relies on a combination of factors such as claims history and local crime statistics.

The report said that without access to insurers’ data, it would be “impossible to definitively determine what is going on.” [the ethnicity] trend” or to determine whether the pricing was “in proportion to the risk presented to an insurer”.

It added that it was “concerned that the opaque pricing algorithms used by insurance companies . . . could reflect and perpetuate human bias or wider inequalities caused by systemic racism.”

The Association of British Insurers said its members adhered to equality laws and “never” used ethnicity as a factor in setting prices.

“All other assessment factors being the same, two people of different ethnicities living in the same zip code will pay the same premium for their auto insurance,” said James Dalton, director of the general insurance agency.

The FCA said it would continue to consider “any evidence we receive of pricing concerns.” It welcomed the report, saying it “highlights a risk of racial discrimination and raises some potentially challenging questions for insurers”.

It added that insurers “must also be able to assure themselves, and us, that any risk factors they include do not lead to discrimination either.”

In 2018, the regulator said it had found “no evidence of direct discrimination” on protected characteristics such as race, but added that it remained concerned that some companies were using data in pricing that “could implicitly or potentially explicitly relate to race or ethnicity.” ” .

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