Pay as you use insurance 'not dead'

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Despite a major player dropping its usage-based car insurance deal this week, the industry shouldn’t write the idea off altogether, according to one expert.

Consultant James Tanser from Watson Wyatt told the insurance market that while Norwich Union’s decision to drop the car insurance policy was a blow to the concept, it may yet recover.

The usage-based car insurance policy was aimed at young drivers but was suspended indefinitely this week because it had failed to achieve critical mass with this group.

It worked by charging users depending on the distance they drove, types of roads used and times of the day they travelled after collating information sent via a GPS tracking unit installed in the car.

"GPS units are increasingly fitted as standard to vehicles, and some companies have started to include panic buttons and concierge services linked to these units," said Mr Tanser.

"Car manufacturers are also looking further to increase their service offerings, for example by automatically calling emergency services following an airbag deployment. Including car insurance in this type of offering may look like a small step, and so such developments may create an opportunity in the future to combine these technologies and relaunch the pay-as-you-drive insurance concept.

A number of trial schemes are either running or about to start, and they represent a significant outlay in technology and time from the sponsoring insurers. The same technology and road pricing issues as in the UK are on the agenda elsewhere and may mean that usage-based motor insurance may eventually make a come back," he added.

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