Cheap car cover from Big Brother; Insurer uses black-box-recorder

Norwich Union has become the first British company to launch a US- style "pay as you go" car insurance initiative, which could revolutionise the way we purchase vehicle protection.

The pilot exercise involves signing up 5000 existing customers to the scheme and kitting their cars out with a black box capable of tracking precisely where, when and how often they drive their vehicle.

Drivers will initially pay premiums as normal, but the firm hopes to gather sufficient information to allow it to begin charging customers according to their driving patterns, rather than according to age, address and type of car.

Customers will also be able to choose how to pay - either daily, monthly, or quarterly. Norwich Union's Douglas Vallgren believes it will mark a quantum leap in the way we insure our cars.

"It should lead to fairer premiums when we can understand driving patterns better," he says. "We will have information about what time of the day you drive. Is it in rush hour, for example? All these things affect the likelihood of you being in an accident.

"Where you drive and on what kinds of road could all make a difference to the risk. Motorways, for instance, are 10 times safer than other roads, although it doesn't always seem like that. If you spend winter abroad, and don't need insurance, why should you pay for cover which you don't need?"

The black box contains an electronic device which picks up a satellite signal, allowing the car to be tracked. This information is stored in the memory of the small computer also held in the box. The insurer then retrieves this information at regular intervals.

Some drivers will dislike the "big brother" aspect of someone knowing exactly where you have been and when, but Vallgren points out that others will be attracted by the security the system provides.

"Many people will be only too happy to know that if they are caught up in an accident, we know exactly where they are and can get help to them quickly. It may also help to deter thieves," says Vallgren.

Keeping premiums as low as possible is high on the agenda for the more than a million motorists who, thanks to a historic accident, will be renewing their cover this month.

March was the month, 28 years ago, that Britain's biggest ever motor insurer Vehicle & General went bust. All its policyholders were forced out into the market to replace their cover and ever since there has been a big blip in renewals at this time of the year.

And there has probably never been more choice about where to go - or a wider gap between the kinds of premiums you might be asked to pay - following the quiet revolution which has taken place over the past few years.

Adrian Webb at esure said: "Just this week alone we saw a discrepancy of (pounds) 600 in two quotes offered to the same driver. That is an enormous difference in the price of what is essentially a commodity. You wouldn't see that kind of price differential on cornflakes."

So it has never been more important to shop around, and the options seem to proliferate almost daily. You can buy via a broker, and a good one should still be able to find a competitive deal to suit your needs. Or you can buy direct over the telephone or internet. Direct insurers tend to cherry-pick the safer risks, and some, like Glasgow-based esure, actively seek out safe drivers.

But there are a range of specialist insurers who may also offer attractive premiums for your particular situation. Women, who still comprise a smaller proportion of drivers, are statistically less likely to have an accident. The 59% of women with a licence can now buy cover with a female-only insurer, Diamond. No institution, it seems, has yet plucked up the courage to offer a specialised package for the 82% of men with a licence.

Saga specifically targets the over-50s, although many insurers offer discounts to this age group. Nowadays many motor manufacturers have a relationship with an insurer and offer cover to their drivers. Volvo's policy, for example, is supposed to be one of the best options for its drivers.

But a range of affinity groups, trade unions and professional bodies now provide a homespun contract, which may be worth investigating. As insurers learn more about the driving and claims habits of these specific groups, they are able to tailor cover and cut premiums further.

However, some firms focus on quality of cover rather than trying to offer the cheapest quote. Chris Thompson, of Cornhill Direct, explains: "Price is important, but other things have to be considered. Protecting a 'no-claims' bonus may seem expensive, but in the long run it may save you money if you have an accident.

"But lately we have been filling gaps in the cover on policies. What happens to your pets, for example, if you are in an accident and can't look after them? We will pay for their kennel fees."

Copyright 2003 SMG Sunday Newspapers Ltd.
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