If you only use your car a couple of times a week then car insurance might seem like a lot of money for something you don’t use that regularly.
In 2006 Norwich Union spotted the gap in the market and decided that it might be able to introduce a scheme to service this sort of car owner based on the principle of pay-you-go.
The further you go
Some Norwich Union customers now drive with a "black box" GPS unit installed in their car which tells the insurer exactly how far you’re driving, when and where. Those drivers who clock up a small number of miles and drive at off-peak times stand to make big savings. At its launch the insurer estimated that those drivers who spent less than 6,000 miles on the road could stand to save as much as 30% on the price of their policy.
This sounds like a novel idea, but it’s not necessarily that revolutionary. Most insurers will ask you when you fill out your policy what you estimate your annual mileage to be. The difference with the Norwich Union scheme is that it will be much more accurate.
Each month pay-you-drive schemes charge a basic fee which is then supplemented by an additional fee dependent on where, how far and when you’ve driven.
Right policy for the right person
If you use your car a lot and are driving large distances across the country regularly, or even if you’re using your car for half an hour a day everyday this may not be the policy for you. Other insurers will not be able to penalise you if you do end up driving a lot more miles in a year than expected.
Pay-you-go insurance looks like it could have an environmental impact by encouraging drivers not to make non-essential trips in their car but if you’re after an outright green policy then it there are providers out there offering the service.
The Green Insurance Company for example plans to off-set 100 per cent of your car’s carbon emissions by planting trees on your behalf.
Even if you’re not an eco-warrior making "green" decisions about the car you drive can make a big difference to the price of your insurance. Cars with small engines are less powerful and insurers view them a smaller risk but by having a little engine you’ll end up using less fuel and creating fewer emissions.
Car insurance of the future
Pay-you-go car insurance has taken off in a big way and there are obvious benefits. If you think that you’re paying too much for your policy then it could be worth considering. If you’re on the market for a new policy then be sure to shop around, particularly online where there are normally big online discounts to be had.