We explore the impact of motor insurance prices on consumers from minority ethnic backgrounds.
A well-functioning retail insurance market helps consumers navigate their financial lives, provides peace of mind, and supports growth through the effective management of risk. Motor insurance is an essential financial product, with around 34.7 million product holders in the UK as of 2024.
The consumer group Citizens Advice has previously raised concerns that people living in areas with higher numbers of residents from minority ethnic backgrounds are paying more for motor insurance. As part of the Motor Insurance Taskforce, the FCA outlined that it would analyse the impact of insurance prices on different customer groups, including those from minority ethnic backgrounds. We continue to work with taskforce members on ways to reduce the costs of motor insurance.
In this research note, we used a large, detailed dataset which contained information on policies, premiums and actual and expected claims costs to provide the most comprehensive analysis possible on what drove differences in motor insurance premiums between areas with differing proportions of individuals from minority ethnic backgrounds.
Our analysis shows that the relative risks in a geographical area account for the overwhelming difference in prices between those areas with high and low numbers of residents from minority ethnic backgrounds.
Authors
Dobrin Barakov, Edward Barrett, Daniel Bogiatzis-Gibbons, Lawrence Charles, Annette Reid, Wenjin Li
Disclaimer
Research notes contribute to the work of the FCA by providing rigorous research results and stimulating debate. While they may not necessarily represent the position of the FCA, they are one source of evidence that the FCA may use while discharging its functions and to inform its views. The FCA endeavours to ensure that research outputs are correct, through checks including independent referee reports, but the nature of such research and choice of research methods is a matter for the authors using their expert judgement. To the extent that research notes contain any errors or omissions, they should be attributed to the individual authors, rather than to the FCA.