Pay-as-you-drive insurance makes a comeback

Tuesday, 13 January 2009 12:00

'Pay-as-you-drive' insurance policies are about to take UK motorists by storm, according to one provider.

Although the concept of using a 'black box' in-car tracker to measure mileage has been around for a while, take-up has been slow and pioneer Norwich Union 'paused' its policy last year due to the cost of providing the service.

More Than still offers a similar policy for young drivers, Drive Time, but until now consumers have had limited alternatives.

However, new technology with the added bonus of theft-tracking means several insurers are now offering policies through Coverbox, giving consumers more choice.

Customers logging onto the site receive a selection of quotes from insurance companies offering the service, including The Co-operative, Allianz Insurance, Equity Red Star and Groupama Insurances.

Coverbox said insurance will ultimately be offered by six big insurance brand names, with the remaining two insurers to be confirmed shortly.

Sandy Dunn, chairman of Wunelli, the company behind Coverbox, said: "We believe both the consumer and the motor industry are now truly ready for pay-as-you-drive insurance.

"Others have tried before with older generation technology but our solution is new-generation, highly-capable and based on integrated security solutions specified and proven by the leading car manufacturers in Europe and Japan."

Coverbox calculates the cost of insurance based on the driving habits of the customer, then fits a box to their car that will calculate the actual mileage.

The customer then receives monthly bills based on their usage.

"In summary, it will work very much like a monthly utility bill - the key difference, though, is that low risk drivers who use their cars little and in off-peak periods are not penalised by the actions or accidents suffered by higher risk drivers driving at higher risk times," Mr Dunn added.

"We believe a significant number of Coverbox customers will save a great deal of money compared to the cost of 'traditional' car insurance premiums."

James Harrison, chief executive of comparison website Insurancewide.com, said: "Coverbox could be a good deal for younger drivers with low mileage. This kind of scheme didn't work for Norwich Union because the take-up was lower than expected, possibly because drivers were wary of the Big Brother type tracking device.

"However, Coverbox's impressive claim that its own device will recover 98 per cent of stolen vehicles will attract great interest and it may be far more successful. It's also flexible in that there's no age restriction and you can specify likely peak and off-peak mileage.

"For older drivers with average mileage, there are no clear advantages through Coverbox and drivers should compare its offer very carefully with other providers by scouring the market online. Comparing like-with-like is the absolute key to getting good value, it's not just about the lowest price."

Norwich Union said it currently has no plans to bring back its own popular pay-as-you-drive policy.

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