'Pay-as-you-drive' policy dropped
Updated on 17 June 2008
Norwich Union has suspended its innovative Pay-As-You-Drive insurance policy less than two years after it was launched.
The UK's biggest insurer said it was "pausing" the policy, under which people pay insurance based on how much they use their car, after take-up of the technology it uses was slower than expected.
It said it would not be writing any more of the policies in the near future, while customers who currently have one are being contacted and moved to alternative deals.
The policy uses global positioning system (GPS) technology to track people's car usage through a black box installed in their vehicle.
They are then charged a rate starting at around 0.25p a mile depending on the time of day and the type of road they are using and how long their journey is.
People are charged higher rates for journeys made at times that they are more likely to have an accident, such as during the rush hour and late at night.
The policy could lead to high savings for people with low car usage or young drivers, who typically face very high insurance costs, with Norwich Union saying people involved in its pilot of the product saved up to 30%.
But the group admitted that sales of the policy had failed to be as high as it had hoped, although it declined to give figures. It also said adoption of telematics technology had been slower than it had expected.
The group had predicted that manufacturers would install the boxes in cars as standard, but this has failed to happen, leaving Norwich Union to foot the bill for providing the boxes, making the policies more expensive to offer.
A Norwich Union spokesman said: "We thought the telematics market would be further along than it is now and we are waiting for the market to catch up."
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