BBC Verify collected thousands of quotes based on identical driver information, but with different addresses. It found that areas with a high number of people from ethnic minorities saw higher prices, even when road accident and crime levels were similar.
Looking at the findings, Citizens Advice said they added to evidence of an “ethnicity penalty”.
When you apply for car insurance, the insurer or price comparison site will ask for personal details including your address, age and driving history. But exactly how premiums are calculated remains a mystery, as insurers don’t make this information publicly available.
BBC Verify tested the effect of changing a driver’s address on the cost of insurance. Researchers chose 6,000 addresses from a spread of more and less wealthy and diverse areas, selecting 20 in the most deprived and 20 in the least deprived for each English local authority.
All other details such as the driver’s age, job, driving history and car model were kept the same. Crime and road accident levels, both of which are known to affect insurance premiums, were also taken into account.
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The study found that, on average, car insurance quotes were 33% higher in the most ethnically diverse parts of England, compared with the least diverse areas.
Quotes for a 30-year-old teacher driving a Ford Fiesta averaged at £1,975 if they lived in the Princes End area of Sandwell, near Birmingham. However, in the nearby Great Bridge area, the average was £2,796.
The two areas have similar scores for road accidents and crime, but Great Bridge has a larger black, Asian and minority ethnic population.
Findings raise ‘an important public policy debate’
A spokesperson from the Association of British Insurers (ABI) said: “Insurers do not and cannot use ethnicity as a factor when setting prices and our members comply with the Equality Act 2010.
“However, we recognise that these and other similar findings raise an important public policy debate.”
A 2023 Citizens Advice survey of 15,000 people found that people from ethnic minorities were charged 40% more on average than white people.
David Mendes da Costa, principal policy manager at Citizens Advice, called for the Financial Conduct Authority (FCA) to investigate why people of colour are being charged more in the reported “ethnicity penalty”.
An FCA spokesperson said it was looking into the concerns. A statement from the regulator said: “We recently asked the largest motor insurers to show us how they ensure their pricing models do not discriminate based on ethnicity, and we are reviewing their responses.
“The law is clear that insurers must not discriminate based on certain characteristics, like race and ethnicity. They need to be sure, and be able to reassure us, that they are not doing so. Our rules also mean insurers should only sell products that provide fair value to their customers.”
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