Ethnic penalty issue referred to Equality and Human Rights Commission

The suggestion that the insurance industry may be discriminating by race will not go away

Insurance News

By Paul Lucas

The concept of the insurance industry discriminating by race is certainly highly controversial – and it seems the issue is not about to go away.

Back in August we covered news on a report, co-written by former equality commissioner Trevor Phillips, which suggested that policyholders are paying what was described as an ‘ethnic penalty’ of as much as £450 a year (see article) – suggesting there is a statistical link between the cost of car insurance and the proportion of ethnic minority households in an area. The issue prompted plenty of reaction.

Now, campaigning law firm Thompsons Solicitors has submitted findings that it claims “strongly link” high car insurance premiums to ethnicity to the Equality and Human Rights Commission (EHRC) after the government indicated it would not take any action on the issue.

The law firm is asking EHRC to intervene as it insists that potential indirect discrimination “cannot be ignored”, with Tom Jones, head of policy at Thompsons Solicitors, suggesting that proposed reforms to personal injury claims only make the issue all the more prevalent.

“The government has a statutory duty to consider the race impact of its reforms and has admitted it doesn’t have any data - but then turns its nose up at a robust piece of research by reputable experts that shows there is a problem,” he said.

“Our report is unequivocal in saying that the process of premium setting has definitely produced an inequality of outcome to the detriment of black and ethnic minority groups.

“We are not saying this is deliberate, but the insurers have serious questions to answer about the way they calculate premiums and the government has a legal obligation to demonstrate that any savings from small claims reforms will not only be passed on but will be passed on fairly without any racial bias.”

The WebberPhillips research found that people who live in multi-ethnic districts pay an ‘ethnic penalty’ in higher-than-average motor premiums of up to £458. The additional cost, it states, affects an estimated 12 million people – more than one in five UK residents - regardless of the driver’s own ethnic origin. The report also concluded that the variations cannot be accounted for by prevalence of crime, or fear of crime, available claims data or relative affluence.

“We have submitted the findings to the EHRC because the government, the FCA and the ABI appear unwilling to investigate them, explain how they set prices or provide additional data to independently verify that their systems aren’t discriminatory,” continued Mr. Jones.

“If their system of price-setting produces an inequality of outcome for people of certain ethnic backgrounds– i.e. they are financially worse off – then they’ve broken the law. Airbnb has faced similar suggestions in the US that their system have allowed racial discrimination to occur.

“We hope that the EHRC will take action to ensure that all motorists are treated equally and no one is subjected to an ‘ethnic penalty’.”
As insurance professionals we’d like to get your opinion on whether this issue is worthy of investigation or whether the statistics being claimed are unjustified? Leave a comment below with your thoughts.


Related stories:
Is insurance industry discriminating by race?
Controversy over “ethnic penalties” in insurance

 

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