Thousands of motorists are road-testing a new pay-as-you-drive insurance scheme.
Up to 5,000 cars are being fitted with the technology
Up to 5,000 Norwich Union policyholders are having their cars fitted with a "black box" which tracks every completed journey they make.
The technology, similar to that used in mobile phones, will allow the insurer to bill motorists for each mile driven.
The two-year pilot scheme could help cut premiums for occasional car users, but may mean more expensive car insurance for high-mileage drivers.
The black box is smaller in size than a DVD case and is installed either in the boot or passenger area of a policyholder's car.
The box records real-time vehicle usage and sends the data to Norwich Union securely using mobile technology.
A monthly insurance bill will then be sent to the policyholder based on an agreed insurance cost per mile.
The cost per mile will be based on a number of factors - such as insurance history, the age and sex of the policyholder as well as how the vehicle is being used.
"The interest in the pilot scheme has been phenomenal," Robert Ledger, director of the pay-as-you-drive scheme, told BBC News Online.
"We could have filled the pilot twice over with the amount of requests we've had from interested motorists, not just within the UK but from drivers around the world."
Progressive Insurance, the USA's fourth largest car insurer, has already piloted a pay-as-you-drive scheme across the Atlantic.
Norwich Union, the UK's largest car insurer, has exclusive rights to market the technology in UK and Europe.
If the pilot is successful the technology may become available to other Norwich Union customers.
Linda Jones, 45, from Chichester, a registered childminder, believes she will save on her £300 annual car insurance premium by being a pay-as-you-drive pilot volunteer.
"I only cover 6,000 miles a year, with a lot of short journeys, but with several children to ferry about my car is essential," Ms Jones told BBC News Online.
"Pay-as-you-drive seems such a good idea for a low-mileage driver like me."
However, Ms Jones acknowledged that paying for car insurance by the mile may not be right for everyone.
"My two eldest children drive cars and cover a large number of miles each year. They are not keen on the idea of a pay-as-you-drive scheme," she said.