The insurance industry has faced allegations of indirect discrimination against those from Black, Asian and ethnic minority background for years.
The insurance industry has faced allegations of indirect discrimination against those from Black, Asian and ethnic minority background for years.

Shabana has written to the Financial Conduct Authority regarding proposals to monitor alleged indirect discrimination in the car insurance industry.

In December, Shabana met with industry professionals including the Association of British Insurers, Members of Parliament and constituents, to discuss the issue of extortionate car insurance premiums.

The industry has faced allegations of indirect discrimination against those from Black, Asian and ethnic minority backgrounds for years.

At the December roundtable proposals were put forward to test the alleged discrimination and ensure consumers weren’t paying above the odds on premiums versus claims.

In her letter to the Chief Executive of the FCA Shabana reiterates her frustration due to the lack of engagement on this issue. She suggests the FCA take forward the proposals to establish once and for all if there is unfair treatment of car insurance customers from ethic minority backgrounds.

You can read the letter in full below.


Letter to the FCA

Dear Chief Executive

I am writing regarding car insurance premiums and alleged indirect discrimination in the car insurance market.

As you will be aware, I have repeatedly attempted to engage with you on this incredibly important issue, and I am disappointed that as yet, you have failed to directly address my concerns and the concerns of my constituents.  I am particularly frustrated to have been repeatedly told that your report on General Insurance Pricing Practices, published in October 2019, addressed this issue, when a cursory scan reveals that it in fact does not mention race discrimination at all.

As part of my ongoing work on this topic, on 3rd December 2020, I convened a roundtable attended by my constituents affected by high insurance premiums, MP colleagues, Richard Webber from Webber Phillips, and representatives from the Association of British Insurers and the Chartered Insurance Institute. Those present at the meeting heard constituent and MP testimonies regarding the scale of alleged indirect discrimination in the industry that negatively impacts younger drivers, those from ethnic minority backgrounds, and those who live in postcodes with more diverse communities.

Representatives from the Association of British Insurers strenuously denied any allegations of direct discrimination based on ethnicity when accessing the insurance market, and I believe this to be the case.  However, at the roundtable I restated my support for an investigation into indirect discrimination, where consumers may be paying above the odds on premiums versus claims.

At the meeting, Richard Webber outlined one particular proposal for assessing whether or not indirect discrimination is taking place in the industry. He suggested that the insurers themselves would first code the premiums and claim files with an ethinicity code and then analyse the ‘claims ratio’ of the categories that had been coded, where they can ascertain if individuals are paying out more for their premiums versus the amount of claims. The consumers anonymised claims ratio can then be matched to ethnicity using origins software produced by Webber Phillips, which has shown consistent success in mapping forenames and surnames to ethnicity. I attach a copy of Richard Webber’s presentation for your review.

It seems clear to me that this proposal gives us the chance to establish once and for all if there is unfair treatment of car insurance customers from ethic minority backgrounds.  If the results prove that those with extraordinary claims ratios are linked to individual profiles from ethnic minority backgrounds, it would be clear that indirect discrimination exists in the insurance market. If the opposite is true, insurers will finally be cleared of any allegations of foul play.

Indeed, following the Treasury Select Committee’s investigation into Consumer’s access to financial services (May 2019) the FCA Responded that it would be happy to work with the Equality and Human Rights Commission (EHRC) on this issue. Action is desperately needed to fully investigate this issue alongisde the EHRC.

Given your failure so far to properly address this issue, I would be grateful for an answer to the following questions by return:

  • Does the FCA agree with me that there is a need to establish once and for all whether indirect discrimination exists in the insurance market, and that indirect discrimination is just as serious a problem as direct discrimination?
  • Will the FCA consider Richard Webber’s proposal, or suggest an alternative way of settling this matter?
  • If it is demonstrated that geography and age are disproportionately capturing people from ethnic minority backgrounds then would this provide sufficient evidence for the FCA to take action to ensure the insurance industry changes its practice?

I want to reiterate again how frustrated I am at the lack of engagement on this issue, and I look forward to receiving your response to these questions so we can finally move forward in addressing these serious matters.

Yours sincerely

Shabana Mahmood MP

Birmingham Ladywood

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