A growing number of motoring experts are calling for car insurers to be more transparent following the news that cover is often more expensive for people living in ethnically diverse areas.
As the cost of motoring continues to rise, the average driver pays nearly £1,000 a year to insure their car, with parts of the UK paying significantly more.
Deborah Bale, Head of General Insurance and Broking at NTT Data UK & Ireland, called for insurers to take responsibility in making sure they are not prejudicing drivers from different backgrounds.
She explained: “The recent findings regarding car insurance premiums underscore a concerning lack of transparency in how these decisions are made. Six months on from Consumer Duty coming into force, firms have a responsibility to secure more positive outcomes for our customers – including price and value.
“It’s critical that we shine a light on the ‘black box’ of algorithmic decision-making processes. Just as we demand clarity and fairness in workplace diversity and inclusion, the same standards must apply to how insurance premiums are calculated.”
According to a report made by the BBC, motorists who live in backgrounds with a more diverse population typically pay around 33 percent more for their average policy.
The study found that a 30-year old teacher living in Great Bridge in Birmingham, with a black, Asian and minority population of 44 percent, was £2,796 for the year.
However, an equivalent driver living in Princes End in Birmingham, an area with an 11 percent black, Asian and minority ethnic population, was typically charged £800 less.
Deborah noted that investigating the algorithms currently used by car insurers could highlight any disadvantages certain groups of people face.
She added: “Algorithmic transparency is not just about revealing how decisions are made; it’s about ensuring these processes are fair, non-discriminatory, and serve the interests of all consumers, irrespective of their background.
“This issue highlights a broader challenge within the tech-driven aspects of our industry – the need for ethical AI and algorithms that do not inadvertently disadvantage certain groups. Transformative technologies, such as AI, will provide the transparency insurers need to not only satisfy Consumer Duty but also provide customers with the confidence they are being treated fairly.”
Typically the cost of insurance is based on a variety of factors, including the make, model and trim level of the car being covered, the mileage the owner typically travels and their job.
Whilst insurers do not ask customers for their race or ethnic background, they will ask for the address at which the car is typically kept.
This primarily affects the cost of premiums by looking at the crime rate in the area, however since very few insurers give exact information on how they calculate prices, it is difficult to judge if other factors can affect it.
