Insurer launches pay-as-you-go car cover

Norwich Union is piloting a "pay-as-you-go" car insurance product.

13:16 18 August 2004

Insurer Norwich Union is piloting a revolutionary new scheme aimed at calculating car cover on how often, where and when people drive.

The "pay-as-you-drive" pilot scheme involves hundreds of motorists, from low mileage users to long distance drivers, including those living in rural and urban areas.

"Black box" telematics devices are now being fitted into 5,000 Norwich Union customer cars across the UK. The box, smaller than a DVD case, records vehicle usage and sends the data to Norwich Union, using similar technology to mobile phones.

Under the two-year pilot scheme, a monthly insurance bill will be sent to the policyholder based on an agreed insurance cost per mile.

Norwich Union described the move as "a major breakthrough in the development of more tailored motor insurance premiums, enabling us to treat all drivers as individuals".

The company will make a decision about whether or not to roll-out the scheme nationwide at the end of the pilot project.

Robert Ledger, the programme director for the scheme, said the level of interest had been unexpected.

"We could have filled the pilot twice over with the amount of requests we have had from interested motorists, not just within the UK but from drivers around the world," he added.

However, some drivers are likely to see the insurance plan as an intrusion into their privacy because the black box will allow the insurer to know their location at all times.