'Pay As You Drive' insurance anyone?

Drivers are set to take greater control of their motor insurance and save up to one third on their premiums with the launch of 'Pay As You Drive' insurance, claims Norwich Union.

The insurer has been trialling 'Pay As You Drive' insurance since 2004, when a pilot of 5,000 motorists was launched. Using driving data from the pilot scheme, it has developed the first policy to help motorists control the cost of their insurance by making informed choices about when, where and how often they use their car.

In-car GPS devices allow Norwich Union to build the insurance policy around each individual motorist. Customers will receive monthly bills based on car usage, including time of day, type of road, and mileage. Itemised billing will be available - much like mobile phone bills - with the premiums for each journey calculated and totalled.

'Pay As You Drive' insurance is being pitched at two different customer groups, each with different pence per mile rates to suit their driving habits. For motorists aged 24 - 65, for example, the policy has been developed based on pilot data which showed that driving during a morning weekday rush hour is 50% more likely to result in an accident than driving at weekends or in the evening, that serious accidents are more likely to occur at night and that motorway driving is up to 10 times safer than driving on low speed urban roads.

Costs for off-peak motorway driving are from 1p per mile, while costs for off-peak urban driving are from 4p per mile.

The second group being targeted is young drivers aged 18 - 23. Here, the argument is that young drivers face high premiums due to the nature and frequency of accidents.

To encourage young drivers to leave their vehicles at home, policyholders will be charged £1 per mile driven during the high-risk accident time between 11pm and 6am. Off-peak driving prices start from 5p per mile. Drivers will also benefit from 100 free off-peak miles every month.

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2006-10-05 10:24:02 © Moneyextra.com