Living in a more deprived, more ethnically diverse location increases your chance of receiving a higher quote, a new survey on the Irish insurance industry has found.
This can lead to extreme situations where a 25-year-old in south Dublin gets cheaper cover than a 60-year-old living in what the researchers describe as “poorer locations”.
It means that motorists are subject to a “postcode penalty” when fulfilling their legal requirement to get cover.
Occupation is also a major driver of the cost of cover, according to a survey carried out by UCD-based artificial intelligence (AI) research group CeADAR in conjunction with Irish firm Idiro Analytics.
It did an analysis of almost 40,000 quotes from 10 car insurance companies across 20 locations in Ireland.
The study found that penalty points are not as big an issue in terms of the cost of insurance as the policyholder’s address.
The researchers found higher quotes for those living in a “more deprived, more ethnically diverse location”.
Address as a factor trumps driving experience and the length of time a driver has had a policy.
The report also found that the extent to which the premium increases if a driver receives penalty points varies depending on their location.
It found drivers in Dublin 17, who receive penalty points, can expect an average increase in their premium of 107pc, from €792 to €1,642.
This is compared to a 68pc increase for drivers in Mallow, Co Cork, from €560 to €941.
And a driver’s occupation increases their quote even if they don’t use their car for business purposes. This is then compounded by where they live.
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Retail workers are most affected by this.
A driver who works in retail and lives in Balbriggan, Co Dublin, will see their premium increase by 35pc, from €555 to €747 due to their occupation.
But this is compared with a 5pc rise, from €512 to €540, for a retail worker living in Glenageary, Co Dublin.
The year-long research analysed almost 40,000 quotes from 20 locations around Ireland, including counties Dublin, Cork, Longford, Roscommon, Wicklow and Donegal.
Multiple samples of quotes were collected to isolate single changes to accurately measure the effect of each change – for example, a driver’s name, home address or gender – on the quoted figure, according CeADAR.
The research did find big differences across the 10 insurers whose quotes were analysed.
Researchers also found that residents of Longford town are quoted the highest premiums.
Thos in Crookstown, Co Cork, receive the lowest quotes.
There was no difference in quote between those with traditionally Irish names and those with non-Irish-sounding names.
There was also no significant difference between males and females, the analysis found.
Drivers who make claims, even when they are not at fault, receive higher quotes.
The aim of the study is to understand how insurance companies’ algorithms work and the extent to which unconscious bias is embedded in them, said Dr Adrian Byrne of CeADAR and Idiro Analytics.
The companies could have legitimate reasons for quoting higher prices for some areas – higher rates of car-related crime, for example – but bias or unconscious bias could arise if those areas are also more ethnically diverse and economically deprived, he said.
European legislation due to be introduced later this year will see essential service providers like car insurance companies penalised for failing to guard against bias in their AI systems.
Companies found to have broken the rules of the EU AI Act will find themselves liable for administrative fines of up to €30m or a sum equal to 6pc of their annual turnover.
Dr Byrne said: “Living in a more deprived, more ethnically diverse location not only increases the chances of receiving a higher quote, but if you add penalty points, claims and zero NCB (no claims bonus) into the mix then we have seen unequal treatment between different locations.
“In extreme comparisons, we’ve seen 25-year-olds in the most well-heeled locations be predicted to receive a lower quote than 60-year-olds living in the poorest locations despite having much more driving experience and policies in their own name.”