Pay As You Drive Car Insurance

How it works

Norwich Union recently launched their ‘Pay As You Drive’ car insurance cover after a successful pilot scheme. The customer pays £50.00 for a GPS ‘black box’ to be installed in their car. The device sends information back about where you were driving, for how long and at what time of day. The two insurance packages available are determined by the driver’s age - one group aged between 24 and 65 and the other between 18 and 63. The charges can vary within each group between 1p and £1.00 per mile according to the time of day, distance traveled and the type of road.

Driving between 11pm and 7am has been shown to be a time period during which more accidents occur. The risk is greater for younger age groups and particularly during those hours.

Who will benefit and will it catch on?

If the scheme is seen to be popular with car owners and beneficial to car insurance companies in terms of reducing pay outs then it is likely to become more widespread and perhaps more competitive.

The public are likely to welcome any reduction in road traffic accidents [more about road safety] and many will be attracted by the prospect of cheaper car insurance tailored to their particular driving habits. Initially the scheme will benefit low mileage drivers who previously paid the same as high mileage drivers.

Public concerns about information security and the right to privacy

Inevitably there will be much debate about what some see as the further erosion of civil liberties and privacy. Norwich Union has made it clear that information will only be made available to police in the event of an accident or crime and it is unlikely that this will cause many objections. In fact this is already provided for within the Data Protection Act

Many people are concerned about how secure the information will really be, who will have access to it and to what other uses it could be put. Others may take the view that your buying preferences are already revealed to supermarkets and credit card companies and surfing habits can be recorded by search engines.

In the information age data is already collected from a large number of sources and it is natural that businesses and other organisations will want to make use of it to provide better services, reduce labour costs, increase overall public security and fit policies more closely to the public’s preferences and needs. Others will see this as one more contribution in the insidious creep towards the Big Brother state and it is equally right that these concerns are aired properly.

In the public debate that will follow it should be remembered that the collecting of data did not begin with this development, that we already allow large amounts of information about us to be stored and that there will be more to come. The bigger questions should include the following -

  • How far will this go and towards what kind of society will this lead us?
  • How much can we trust the agencies that collect information?
  • How securely can the information really be kept?
  • Do we need additional controls from government - who are also collectors of information – to strengthen the Data Protection Act [more about Data Protection]?
  • How can we be sure that the controls will be enforced properly and is the level of control we want even possible?
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