Could pay-as-you-drive insurance work?

Motorists are routinely driven to distraction by car insurance bills over which they have little control. A GPS based system aims to end all that, by introducing monthly pay-as-you-drive cover.

A little black box hidden away in the boot of your car could lead to itemised monthly bills for cover, insurers say.

Insurers say they have no fixed ideas of who is most likely to crash

Using telematics - a combination of information and communication technologies - to keep track of your movements, the devices are at the centre of plans to introduce pay-as-you-drive insurance.

It could mean cheaper bills for people who only use their car occasionally, but extra costs for those driving long distances along busy routes every day.

By the end of the year 5,000 cars will have been fitted with the black boxes, to collect data for an 18 month pilot scheme.

Insurers Norwich Union hope to introduce the cover in two years time, so how does the technology work?

1 Telematic device fitted in boot of car
2 GPS satellite used to track car's route and time of travel
3 Information is stored by the device in the car
4 Device then calls insurer's computer with data
5 Computer works out your bill

Similar in size to a DVD case, the black box stores the kind of information that a tachograph collects about the HGV lorries they are fitted on.

How far the car has been driven can be measured, along with the speed at which it travelled and at what time the journey took place.

Using GPS technology, the black boxes will also be able to record exactly which roads a car was driven on.

All the information is then sent back to the insurers via the little black box, using technology similar to that used by mobile phones.

Based on the information gleaned about your driving over the past month, the computer works out an itemised bill.

Presumably, the plop of the snail-mail letter onto your doormat is the only part of the system which is not hi-tech.

No conclusions

"Insurance premiums in the future could be calculated on how often, where and when people drive their cars," says Norwich Union.

The firm says no conclusions have been reached about what time of the day or which roads will be deemed less risky, and therefore cheaper to be insured on.

"It might be the case that you're less likely to have an accident on the motorway than a local road," says a spokeswoman.

"But it could be that you would have a more serious and costly accident on a motorway."

Pay-as-you-drive car cover tested

In theory the system could also offer tips on how to cut motoring costs.

The insurer says it could suggest ways of saving money - perhaps by driving for part of your journey and then catching the bus to avoid slow roads where you will burn fuel while stuck in traffic.

"Because we will have some idea of their driving pattern, we will have knowledge of their area and where there's a congestion charge and so on," says the spokeswoman.

"We will be able to work out how much money they could save."

It hopes drivers will also be attracted by the added advantage that a car constantly hooked up to GPS is more difficult to steal.

There's no getting away from the eye in the sky, even for car thieves.