BBC News Online: Business

'Black box' insurance for motorists

The black box is fitted next to the car's engine

Premiums would then be altered to reflect people's driving habits.

Customers would have a 'black box' device fitted in their car, which would transmit their journey details back to the insurance company.

Monthly bill

The system is being piloted among 5,000 drivers by the insurance firm Norwich Union, which has dubbed the scheme 'Pay As You Drive'.

The black box will record the mileage and time of each journey, and which road the driver has travelled on.

The information will then be used to calculate a monthly bill for the driver.

Norwich Union says the customer is likely to get a bill more similar to those seen for gas, electric or phone usage.

'Pay As You Drive'

Users will pay a monthly premium to cover basics like fire and theft, and then get an itemised usage bill on top.

"It's a much fairer system of working out car insurance," said Liz Kennett of Norwich Union.

The company says it is not sure what the overall impact of the system will be on premiums, but that 'safer' drivers should benefit.

"It will be particularly beneficial to those who do short journeys or for those who don't use their car that often," said Ms Kennett.

If the trials are a success, Norwich Union hopes to roll out the scheme by 2004.