Insurer stops 'pay as you drive'

By Bob Howard
BBC Radio 4's Money Box

BIBA's Graeme Trudgill believes people don't like being monitored

Britain's biggest insurer has suspended a flagship car insurance scheme less than two years after its roll out.

Norwich Union's "pay as you drive" policy used satellite technology to track every journey via a black box installed in customers' cars.

It resulted in cheaper premiums for people who avoided driving at high risk times like rush hour and late at night.

The company said too few customers had joined, and blamed a slow take-up rate of the technology amongst car makers.

I'll be sad to see it go, it saves young people like me money Money Box listener Clare

Norwich Union hoped that by encouraging people to drive less at rush hour and late at night it would pay out less in claims, meaning it could offer lower premiums.

Customers who joined had a black box fitted in their car which constantly fed back data on where and when they were driving.

Cost

Younger drivers were charged at about 5p per mile if they avoided rush hour, but at £1 a mile for driving late at night.

Norwich Union had set a target of 100,000 drivers. The company would not reveal exactly how many people had signed up but said it was "not less than 10,000"

Clare from Preston joined three years ago and estimates she was saving up to £50 a month.

She told Radio 4's Money Box programme she was disappointed that the scheme was being suspended.

"I might have to change companies, it depends on how much they're going to quote me," she said.

"I'll be sad to see it go, it saves young people like me money," she added.

Customers don't like the whole Big Brother attitude Graeme Trudgill, BIBA

Norwich Union is writing to customers to inform them of the change. It says no one will be left without insurance, and that it will offer them a discount on its standard insurance policies.

The insurance industry had been closely watching the scheme's progress.

Privacy

Graeme Trudgill from the British Insurance Brokers' Association thinks many drivers did not like the idea of being constantly monitored:

"The customers don't like the whole Big Brother attitude," he told the programme.

"They don't like the fact that someone is going to know exactly where they're going, at what time and at what speed as well," he added.

The suspension of "Pay as you drive" could have repercussions beyond just car insurance.

Any road pricing scheme introduced by the government is likely to use similar technology to send back data.

Edmund King, president of the AA, says the government will now no longer be able to benefit from the insurance industry piloting these systems:

"The fact that people aren't really accepting it as quickly as people thought is probably putting the government plans on the back burner."

On Monday, Transport Secretary Ruth Kelly told the BBC she was still not convinced that the technology currently available could guarantee an effective road pricing programme.

The Department of Transport said trials of the technology are expected to begin in the Autumn.

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BBC Radio 4's Money Box was broadcast on Saturday,
14 June 2008 at 1204 BST.