Norwich Union (NU) is set to pilot pay-as-you-drive motor insurance premiums. Instead of charging a rate based on information given by customers, NU will be recording how many miles customers are driving and what areas they are driving in.
Pay-as-you-drive was pioneered by US insurer Progressive in 1998. Progressive is consulting with Norwich Union on the UK insurer's plans to bring the system to market by t2004. Progressive's Autograph system has lowered customer premiums by about 20%, said NU.
NU, which insures one in five UK cars, hopes to have 5,000 trial users by the end of the year. It will charge users a flat fee-covering liability and other risks. This will be topped up by a fee based on monthly mileage driven, area driven in and other factors provided by on board telemetry.
A black box in the vehicle uses mobile phone networks to relay messages to NU's IT support systems. Global positioning satellites help the black box record the car's co-ordinates.
The pilot users will receive the black box, which is the size of an immobiliser, free, but future users will have to pay for the box to be installed.
NU head of telematics Robert Ledger, said the insurer has 30 to 40 staff working on the project full and part-time.
Ledger has been working on the project for the past 18 months. Progressive visited Norwich in November to exchange information.
NU is currently negotiating with contractors to supply equipment, IT systems and mobile phone networks.
