People of colour face car insurance ‘ethnicity penalty’, finds Citizens Advice


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”.

Dame Clare Moriarty, chief executive of Citizens Advice, said: “For too long the impenetrable nature of insurance pricing has just been accepted, but a £280-a-year ethnicity penalty cannot be allowed to continue.”

“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.”

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

Responding to the investigation, James Dalton, director of general insurance policy at the ABI, said: “Insurers never use ethnicity as a factor when setting prices and our members comply with the Equality Act. 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.” 

Dalton continued: “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. As the report says, the research ‘was exploratory, and therefore cannot definitively identify what is driving this trend’.”

“However, we recognise this report raises an important public policy debate. Like everyone, our sector has a role to play in addressing inequalities that exist in wider society and it’s an issue that we will continue to engage on constructively as an industry.”


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Mark Dugdale is the editor of Claims Media. Mark welcomes articles, letters or feedback from readers and can be reached via