The concept of "pay-as-you-go" has been a mainstay of the communications industry for many years. A person, who rarely uses a mobile phone or the internet, can benefit from only paying for the amount of calls/texts or downloads they make, without the hassle of paying a flat fee for a monthly contract.
It"s a straightforward concept - and now it can be applied to car insurance too.
Norwich Union, Britain"s biggest insurer has introduced a "pay-as-you-drive" scheme, which is designed for people who don"t use their car very often or only do short journeys.
The insurer provides you with a GPS device that records your journeys and in turn calculates your premiums. It is fitted for free, and if you drive less than 6,000 miles a year, it could save you as much as 30% on your car insurance.
It"s not all about cheap car insurance however, as this tracking device could provide peace of mind too thanks to an assistance button that provides round-the-clock access to help in the event of an accident or breakdown.
The pay-as-you-drive scheme has received mixed reviews across the industry.
The scheme"s critics claim that this is an invasion of privacy and another example of insurers seeking more knowledge about drivers. Many analysts also believe that this black-box style device may be used to help police deal with traffic crimes in the future.
However, Norwich Union argues that it simply allows for fairer pricing and with bonus features such as trials of satellite navigation and speed camera alerts it could even help you avoid trouble.
Whether or not its long-term motives are genuine and this concept will continue to be used to help drivers secure cheap car insurance, clearly this is just the beginning for pay-as-you-drive. Expect it to be implemented by more car insurance companies in the near future.