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Food or car insurance? Tough choices for low income households as costs spiral

Lower income households in the UK are having to choose between buying food or paying the ever-spiralling cost of car insurance, parliament was told yesterday.

Giving evidence to the Treasury Select Committee inquiry into the rising costs, competitiveness and conduct of the insurance industry, the principal policy manager for Citizens Advice (CA) David Mendes de Costa told MPs:

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“The people that are coming to us are having to make impossible choices of whether to pay for their car insurance or put food on the table – we’ve had several clients come to us that are having to make food bank referrals because of the rising cost of insurance.” 

According to Mendes de Costa, half of CA advisers had seen people having to cancel their insurance policies due to rising premiums, up from just 5 per cent in 2002. 

He also highlighted that those on lower incomes tend to be charged more for car insurance, and the same goes for people of colour who, according to CA, are charged £250 more on average than white people for their premiums. 

Mendes de Costa added that this is not a case of direct discrimination, given it’s typically postcodes and other similar factors that are used to determine risk. However, he reaffirmed that “there is no clarity as to what’s driving [higher prices] – what risk factors are applied to postcodes, or what cost factors”.

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