Norwich Union to Offer Young Drivers ‘Pay As You Drive'(TM) Insurance

The U.K.’s Norwich Union has announced an innovative program to give young motorists more affordable insurance premiums. The company has launched “Pay As You Drive” (TM) for drivers between the ages of 18 and 21.

Norwich described the new policy as using “cutting-edge, in-car technology to calculate their premiums based on when and how often they drive their car. The ‘black box’ style device is fitted discreetly into the car and uses Global Positioning Satellite (GPS) technology to record the journeys of the car. This information is then transmitted securely to Norwich Union via a mobile phone network.”

Once the information has been received “premiums will be calculated in a similar way to mobile phone tariffs. Drivers will be able to control their premiums to more affordable levels by driving mainly during ‘off peak’ times between the hours of 6am and 11pm rather than driving during ‘peak’ times between 11pm and 6am.”

Norwich said the “tariffs have been calculated based on accident statistics for the 18-21 age bracket, which show these motorists are at much greater risk of being killed or seriously injured in car accidents between the hours of 11pm and 6am. By reflecting the time of day in the cost, this innovative test product not only makes insurance premiums more affordable, but it deters younger motorists from driving at night when the conditions are less safe.”

The bulletin listed the following features for the “Pay As You Drive”(TM) program:
– a tariff per mile, with the rate personalised to each customer and dependent on the time of day the car is driven
– the first 100 off peak miles each month are free
– young drivers could see a saving of up to 30% a year off the cost of their premiums
– premiums are billed monthly – premiums will vary monthly if customers vary their driving
– there is a one-off fee of GBP199 for the telematic device – this is expected to cost less than the savings to be made in premiums.
– the box has a built in car locator – enabling customers to have their car located if there’s been an accident, breakdown or if it has been stolen

The initiative for younger motorists marks an expansion of Norwich Union’s efforts to popularize “Pay as you Drive” coverage. In August 2004 the company launched a nationwide pilot scheme involving 5000 volunteers of all age ranges to investigate driving patterns and help set premium pricing.

The company said it’s “now able to launch this product for young drivers because the pricing can already be calculated for these motorists as the time of day is such a major factor for this age group. The first 1500 boxes are ready to be fitted in customers’ cars.” The bulletin also pointed out that the “recently published independent Greenaway report into uninsured driving in the UK described ‘Pay As You Drive'(TM) as a ‘potentially helpful innovation’ by setting rates for late-night driving at a high enough level to encourage young drivers not to use their vehicle at this time.”

Robert Ledger, program director for the ‘Pay As You Drive'(TM) insurance scheme commented: “The scheme brings motor insurance into the 21st century by providing affordable comprehensive insurance for young drivers in return for driving at safer times. There’s no getting away from it, Government statistics show that this age group are more likely to be killed or injured in road accidents between the hours of 11pm and 6am – and this has been factored into tariffs for this product.

“Although the money-saving factor will probably be the main appeal for young drivers, I imagine the road safety aspect will appeal to their parents,” he continued. “Although this product may not suit all young drivers, we feel it does offer them an alternative to the standard motor insurance that is currently available. And by having their own insurance policy rather than being a named driver on their parents’ policy, young drivers will be able to build up their own no claims discount, making insurance even cheaper in the future.”