Is insurance racist? How being born abroad can raise your motor cover by £850

Big brand insurers are charging drivers using comparison sites up to £850 more just because they were born abroad.

A Telegraph investigation has revealed several policy providers risk breaching equality laws by setting higher premiums for motorists who moved to Britain when they were babies.

Lawyers argue pricing on these terms may breach the Equality Act 2010 as it is unlawful to discriminate against someone because of their nationality or national origins, which are among the legally-defined protected characteristics of race. 

According to John Halford, of Bindmans solicitors, the law would apply in cases where quote premiums are increased because an individual was born outside of the UK. 

He said: “Nationality and national origins feeds into the concept of race, so this practice would be a form of discrimination, as it disproportionately affects people from different racial backgrounds."

He said it was likely that most people who were born abroad were of non-UK origin, rather than the children of British expats.

Most drivers today buy their cover using price comparison sites. To test whether insurers are abiding by the Equality Act, Telegraph Money created two driver profiles. Both drivers are 40-years-old with 18 years’ no-claims discount. One lives in south London, the other in Leeds. 

We then changed one element of the application for both drivers – switching their "from birth" British residency to "from age of one month". The majority of insurers did not change their quotes, but some well-known brands did. 

RCIB would charge £859 more if the Leeds-based driver was born abroad and moved to the UK at age one month. The London-based driver would also face a higher premium, this time by £741, if they bought RCIB cover via Comparethemarket.com having been born overseas before coming to Britain as a baby. 

Mike Joseph, of RCIB, said the company does not contravene the Equality Act.

One Call Insurance quoted our Leeds driver £2,372 for annual cover via Comparethemarket.com, £683 more for not being born in the UK. The company did not respond to requests for comment.

Several Hastings Insurance brands provided quotes for our London and Leeds drivers across five comparison sites that were more than £150 higher where the driver was not born in the UK. The highest quote difference was £269, for Hastings Direct, Hastings Premier, Insure Pink and People’s Choice policies obtained via Mustard.com. 

A Hastings spokesman said: “Our underlying insurers determine their prices based on many different rating factors which can include the length of time a person has been permanently resident in the UK, a practice that is common throughout the industry. They do not use any protected characteristics including race or nationality to determine their pricing.” 

Insurers are entitled to provide different quotes based on age and disability in certain circumstances, where there is a justifiable reason. Life insurance is cheaper for younger people as they are less likely to develop life-threatening medical conditions, for instance.

However, basing motor premiums on nationality is harder to justify.

Mr Halford said: “For this not to be discriminatory the insurance company would need to start by explaining what legitimate aim it was pursuing by asking whether the client was born in the UK or not.

“Even if the aim were a proper one, it is hard to see how they can have a justifiable reason for doing so that is not disproportionate. Penalising drivers in this way suggests their card is marked at birth, which is clear discrimination.”

Another legal expert, Daniel Fitzpatrick, a partner with Hodge Jones & Allen, agreed this kind of pricing "seems nothing less than race discrimination".

A spokesman for lobby group the Association of British Insurers said: “It is unlawful and unacceptable to price insurance based on national origins and insurers will always act within the law. Mystery shopping exercises on price comparison websites may cause validation issues and trigger fraud warnings, and are therefore not representative of real-life scenarios.

“Some insurers’ claims experience may show that people who have not been a UK resident for a certain period may be more likely to involved in an accident, so reflected in the premium they charge. Motor insurance is a highly competitive market, so it pays to shop around for the cover that meets your needs at the best price.”