NEW ANALYSIS by the University of Bristol shows that people in poverty pay more for car insurance because of factors they cannot control, such as where they can afford to live.
The analysis shows that even when the impact of risk factors such as crime levels, traffic collisions and age are removed, the same driver, in the same car, could still pay at least 15-20 per cent more (£131-156) to get insured in a more deprived area.
The new research looked at over 1,000 insurance quotes, covering a range of different types of area in England and Wales. It was conducted by the Personal Finance Research Centre (PFRC) at the University of Bristol for Fair By Design, a charitable programme which aims to end the poverty premium. The research found:
- People living in the most deprived areas pay between 29-48 per cent extra for car insurance, equivalent to a £234-314 poverty premium when compared to wealthier areas.
- Paying monthly for car insurance, rather than in one lump sum, can cost people on low incomes as much as 40 per cent extra (or £384)
- People living in more ethnically diverse areas pay around 20 per cent more (or £180) than those in less ethnically diverse areas, and this remains true even with quotes for areas that are broadly comparable when it comes to crime, collision and deprivation levels.
To understand why people on low incomes are paying a poverty premium for car insurance, Fair By Design says the Financial Conduct Authority (FCA), the financial regulator, needs to urgently investigate the insurance market.
Martin Coppack, Director of Fair By Design, said: “No matter what, if you live in a deprived area, you will be paying more for car insurance because of things you can’t control, such as where you can afford to live or if you can afford to pay all in one go. This is deeply unfair.
“Many people on low incomes need to have a car to get to work or visit family where no good public transport links exist. If you have a car, you need car insurance. It’s the law. But, as the evidence shows, the poorer you are, the more you pay.
“The insurance market is opaque, and this has led to a lack of action. We are calling on the new Labour Government to follow through with its manifesto pledge to take action on soaring car insurance costs and its pre-election pledge to call on regulators to investigate whether postcode pricing practices are unfairly targeting those on low incomes and ethnic minorities.”
Fair By Design is dedicated to reshaping essential services such as energy, credit, and insurance so that these do not cost more for people on a low income.
* Read the research briefing here.
* Source: Fair By Design