Black boxes to cut young drivers' premiums

Young drivers are being targeted by an insurance policy, launched today, which aims to cut the cost of cover as well as the number of road casualties.

More Than's DriveTime policy is aimed at 18- to 25-year-olds and will use black box technology to track what time of the car is being driven, with penalties for driving between 11pm and 6am, the time when most accidents occur. More Than says that it will cut 40 per cent off its standard insurance rates for those on the policy, but drivers who use their cars after 11pm will pay an additional £25 for each day they do so.

'Premiums will be between £500 and £2,000 for drivers of this age group, giving an average saving of between £200 and £800 on a standard policy,' said Bryan Turner, head of DriveTime.

'As with standard policies, the reduced premium will still be assessed on age, gender, postcode and type of vehicle. The only difference is that there will be a fixed fee for night driving of £25, but there are no other charges.'

More Than says that DriveTime is aimed at single drivers, but it does concede that, as long as they are the principal driver on the policy, it would be possible to add additional drivers who are not between 18 and 25 who would then be able to use the technology as well.

It is initially running a pilot of the scheme for 18 months and is looking for 2,000 18- to 25-year-olds to take part. Those who sign up will receive a Global Positioning System device, delivered and installed free of charge. The box, called a DriveTime unit, which is about the size of a BlackBerry device, will send a message whenever the car is started, with information about the time and place and a further message once the engine is switched off.

More Than is not the only insurer to pilot in-car black box technology. The UK's biggest insurer, Norwich Union, is currently coming to the end of its 'pay-as-you-drive' policy pilot.

It has been conducting trials on 5,000 drivers and an additional 1,500 young drivers for over a year. It has been using the technology more extensively than More Than, by taking into account where the driver is as well as the time of the day they are driving.

'Because the pay-as-you-go element is also based on where you drive, not just when, your mileage could be higher than someone else's, but you would still pay less,' says Ross. 'For example, accidents are less likely to happen on motorways than rural roads, so you'd be charged less for lots of motorway driving.'

Between 6am and 11pm 30 per cent of the cost of the policy is underwritten in the normal way - based on age, sex, type of car and so on - with the remaining 70 per cent based on the number of miles driven and the roads used, with costs from as low as 4p a mile. Young drivers get 100 free off-peak miles a month but after 11pm usage is charged at £1 a mile.

'At the moment the average saving on an insurance bill among the pilot group is 30 per cent,' says Ross. 'The highest saving we have seen has been £1,000.'

Norwich Union is to expand its trial to 100,000 drivers by the end of the year and announced last week that it would begin providing itemised monthly bills to those on the scheme. The mobile phone-style bill will show where drivers were, at what time of day, and how much it cost them per mile. There is a second fixed element of the monthly premium, based on conventional insurance risks such as postcode and the age of the driver.

'It's a bit like a phone bill where you have the fixed cost of the line rental and pay for your calls based on usage above that,' said Ross. 'The monthly premium is a revolutionary thing because you will be able to see why you are paying the price you are charged each month.'

Peter Deane, a managing director at Intec, the company providing Norwich Union with the billing technology, says that the way it is being used now is just the beginning.

'One thing Norwich Union is looking at is adding things like the purchase of other goods on top of insurance through the black box, so you could get one bill for everything at the end of the month,' he says. 'It could even be used to buy things for the car or, eventually, the car itself. NU has a range of financial products that could also be bought with the box and we believe it has chosen the product because of the flexibility of what it does.'

Axa is another insurer which has piloted black box-centred insurance scheme, this time in Ireland and based on a driver's speed. Those who drove carefully were rewarded with lower premiums.

'Anything that introduces the prospect of young people gaining access to insurance at low cost is welcome,' says Richard Mason of insuresupermarket.com.

'The interesting thing is that you can use this technology to assess the driving quality of an individual, so insurers will be able to see how fast you are driving on any particular road and whether you broke the speed limit when you have an accident. You'll also be able to go online and compare your driving with others, and, if drivers improve, the insurer can lower the price.'

'The big issue, however, is the cost of boxes, which are about £150. Insurers are looking at how to cover the cost of the box while keeping your premium down.'

But not everyone is as convinced that the future of insurance lies in black-box technology. 'We will watch the development of this policy very closely as we encourage any initiative that helps young drivers to get affordable, relevant car insurance,' says James Harrison, chief executive of price comparison website Insurancewide.com.

'If other insurers follow suit, however, then the industry needs to be careful not to end up penalising those sections of society who do need to drive at certain times of day and have inadvertently fallen into the "high risk" category created by insurers.'

A 17-year-old living in Leeds and driving a Vauxhall Corsa can currently expect to pay between £4,700 and £5,100 a year on a standard insurance policy with a £250 excess and no other named driver, according to a recent premium comparison of 20 insurers by insuresupermarket.com. Increasing this excess to £500 and putting a parent on the policy could save as much as £850 a year, it found.

· Young drivers interested in taking part in More Than's pilot should call the insurer on 0800 294 8911, email drivetime@morethan.com or visit morethan.com