Ditched pay-as-you-drive insurance set for revival?

A pioneering pay-as-you-drive insurance scheme aimed at helping careful drivers cut their premiums which ground to a halt earlier this year may be set for a revival - if the car industry plays catch-up with the right technology.

Insurance giant Norwich Union launched its Pay As You Drive insurance policy back in October 2006, paying for telematics boxes to be installed in customers' cars to collect data on when, where and how their vehicles were used.

Using this data, drivers were then assessed on how much they used their car, times of day they chose to drive and the types of roads they travelled on - for instance, motorways are considered 10 times safer than local urban roads, according to the company - with motorists who attracted the lowest level of risk getting cheaper premiums.

A spokesman for Norwich Union said it had taken the decision to "pause" the service this summer as it is unwilling to continue subsidising the telematics 'black boxes'.

The company wrote to customers in June to say the service would be put on hold, giving them "three or four months notice" to find alternative cover.

The spokesman told silicon.com: "The problem really goes back to 2001 when we were first looking at pay as you drive we were thinking about telematics becoming an integral part of vehicles - that manufacturers would begin selling some sort of telematics box in vehicles because it seemed the trend at the time.

"That turned out not to be the case and as a result we were paying for the boxes ourselves, so from an operating model point of view, it's not very sustainable right now for us to continue to do that."

The spokesman added the company intends to wait until the motor industry market catches up and then hopes to be able to 'unpause' the service, which he said had been "popular" with customers - who had seen an average reduction in premiums of 30 per cent, while Norwich Union saw a 30 per cent reduction in claims via the policy.

"Both parties are happy, and because of the falling claims you've got road safety benefits as well," he added.

The spokesman said the majority of existing Pay As You Drive customers are moving over to other Norwich Union policies as the company has been able to use the telematics data it has already collected on them to offer new policies.

"Because we know about them as drivers because of the telematics data we're able to give them a pretty good discount using some of the rating factors that we applied to Pay As You Drive so they would get a substantial discount by staying with Norwich Union. Most people we're seeing moving across to Norwich Union simply because they're getting such a good competitive quote," he said.