Are you paying an 'ethnic penalty' on your car insurance?

A report has claimed an "ethnic penalty" applied by insurers means 12 million people are paying as much as £450 a year more for their car insurance.

Webber Phillips, a consultancy co-founded by the former chair of the Equality and Human Rights Commission, Trevor Phillips, found a 60 per cent correlation between higher-than-average premiums and postcodes with a high proportion of minority ethnic households.

That figure rose to 90 per cent in some areas and translated to additional costs ranging from £54 in Manchester to £458 in London, notes The Guardian.

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Based on data provided by the AA covering all 124 postcode districts, the report, commissioned by personal injury law firm Thomson Solicitors, said the statistical convergence could not be explained by factors such as affluence or crime.

It dismisses assumptions around the relative wealth by citing the "significant ethnic penalty" paid by Indian-heritage Britons, who are "slightly more likely than white Britons to occupy higher-skilled professional jobs".

The authors also looked at fear of crime statistics using the most recent official data, but again found little correlation. The same was true of the likelihood of claims, based on publicly available data.

The Association of British Insurers (ABI) reacted angrily to the report, saying it was based on "flawed analysis and statistical coincidence".

James Dalton, the director of general insurance policy, said: "Car insurers have never and will never set prices based on ethnicity, as it is ethically wrong and prohibited by the 2010 Equality Act.

"Premiums are higher in certain parts of the country because claims costs are higher in certain parts of the country.

"This report was compiled without any consultation with the insurance industry, by people with no understanding of how car insurers price their policies, and was paid for by a firm of solicitors with a vested interest in fuelling the compensation culture."

However, Phillips told the Daily Mail the ABI "appear not to have read the report or to understand what we are saying".

He added: "A parallel would be the under-representation of black students in university, which has been acknowledged as a problem by both this PM and her predecessor. Nobody is saying it occurs because lecturers are bigots, but an inequality of outcome does exist.

"The solution to this is simple: they should be transparent and publish their data."

The report did acknowledge that other factors, such as taste in vehicles, age profile and immigration status, could have an impact, but said this could not be examined without access to insurers' data.