Car insurers are launching a second wave of pay-as-you-drive schemes, offering the chance of cheaper premiums not only to the under-25s but to more mature drivers who rarely travel in the rush hour or late at night.
The motoring technology uses a global positioning system, and includes an anti-theft tracking device, to record the mileage and hours of use of a vehicle, and is more advanced than previous schemes.
Co-operative Insurance has launched a new policy based on the technology, which it claims could reduce insurance costs for young drivers from the equivalent of 5p a mile to 1p. Three other insurers are working on similar schemes.
At least 2 million (5%) UK drivers are thought to be uninsured, according to the Motor Insurers' Bureau, an organisation which compensates victims of uninsured driver-related accidents and pays out more than £500m a year from funds levied from the industry.
The Co-op says the average cost of cover for young drivers rose by nearly four times the rate of inflation last year, with premiums soaring to levels that could lead to an "uninsurable generation".
Its analysis of industry figures suggests under-25s typically pay £1,463 a year, with young drivers last year suffering premium rises of 11.5% compared with an inflation rate of 3.1%.
"With this continuing trend, which directly reflects the increased risk posed by young drivers, a whole generation could become uninsurable, adding to the already growing problem in the UK," said David Neave, director of general insurance at the Co-op.
"As long as young drivers are properly educated about the risks of the road and drive responsibly, there is no reason why they should be priced out of the market. Knowledge is a powerful tool to cut the number of young driver deaths on the road, which currently runs at a shocking 13 a week."
The Co-op is working with Coverbox, a web-based brokerage company, to develop the technology alongside Allianz Insurance, Equity Red Star and Groupama Insurances.
A black box is placed in a car, usually under the dashboard. Premiums are then calculated on an individual's actual risk depending on whether the car is used in off-peak, peak or "super-peak" times.
Before young drivers can apply for the Co-op scheme they must answer a series of questions on the dangers of speeding, drink-driving, driving while tired, not wearing a seat belt, and vehicle insurance, under a scheme run with road safety charity Brake.
Penny Searles, commercial director of Coverbox, said: "The big problem for insurers is the cost of the hardware which has to be put into vehicles. You can't add them to insurers' premiums, otherwise you would never sell them anything." But a deal with manufacturers in Italy meant Coverbox would pay for the equipment, which would normally set drivers back at least £300. Its partner companies are expected to meet installation costs or include them in their premiums. The Co-op claims comprehensive cover can cost as little as 1p a mile.
Changing driver habits
The scheme had been trialled on around 50 customers over six months, and drivers have already said they are changing their driving habits by making fewer journeys as a result of the information they gleaned.
Standard insurance quotes are based on a driver's age, marital status, home area, employment status and estimates of mileage each year, and Searles said a more sophisticated system based on true mileage and the times at which you drive could be cheaper for many drivers.
Retired drivers or second car drivers who used their car during the day outside rush hour might be among those who could benefit from pay-as-you-drive schemes, she added.
Norwich Union, the first insurer to offer pay-as-you-drive cover, dropped the product for new customers at the end of 2007 because it did not get the expected take-up and, it said, the motor industry showed little inclination to install equipment as standard.
Only More Than is thought to remain from the first generation of such schemes. It has offered the technology since 2006, saying it cuts its standard rate by 40% for 18-25-year-olds driving between 6am and 11pm. Driving the car outside those hours, when the chances of a car crash are highest, brings an additional fee of £25 a time.
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