insurance documents

Report suggests Motor Insurers penalise ethnic minorities with higher premiums

As reported in the Guardian newspaper yesterday, a report published by consultancy Webber Phillips and commissioned by Thompsons Solicitors, has concluded from an analysis of available data that there is a “strong statistical relationship” between the prevalence of minority ethnic households in specific UK postcode areas and a higher cost of average motor insurance premiums, and that the evidence indicated that ethnic minorities were being targeted by motor insurers for higher premiums.

Using data provided by the AA for all postcode areas in the UK, the report’s authors said they had revealed a tendency towards higher motor premiums in areas with higher compositions of ethnic minorities. The concluded that “the variations cannot be accounted for by prevalence of crime, fear of crime, available claims data or by relative affluence”, in other words the data suggested that even in areas of relatively high affluence there was a correlation between ethnic minority communities and higher premiums.

Trevor Phillips, former Chair of the Equality and Human Rights Commission, and his co-author, Richard Webber, pointed to UK citizens of Indian heritage to illustrate their conclusions;

The minority group most obviously affected in the UK, Indian heritage Britons are far wealthier than other racial minorities and economically almost indistinguishable from white Britons. In fact, this group is slightly more likely than white Britons to occupy higher skilled professional jobs. Yet they, too, pay a significant ethnic penalty”.

Further, the report suggests that there was no automatic correlation with higher crime figures, fear of crime or other such factors that might contribute to enhanced premiums within the effected postcode areas.

James Dalton, Director of General Insurance Policy at the Association of British Insurers rejected the report’s conclusions, stating that

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”.

The ABI’s response to the report is entirely predictable, and may well be justified, but James Dalton’s very response betrays the underlying problem the insurance industry has in dispelling such statistical analysis. For years, the Claimant Lobby and organisations such as the Association of Personal Injury Lawyers and the Motor Accident Solicitors Society, have pleaded with the ABI to reveal the data and statistics that demonstrate how they calculate their insurance premiums, and upon which they base the allegation of a “compensation culture” in Britain. For years they have persistently refused to do so.

Whilst in more recent times there has been more of a shift in their position and some moves towards greater data sharing, there remains within the ABI a reluctance to release data that would demonstrate clearly to the general public how their insurance premiums are made up. Whilst the insurers will no doubt argue that commercial sensitivities prevent such transparency, it is disingenuous to lambast commentators for inaccurate reporting on the one hand, whilst at the same time refusing to reveal the data that, one would hope, would finally reveal the truth or otherwise of such reports.