Norwich Union has launched a revolutionary insurance policy for the motor industry.

With the advent of mobile technology it was only a matter of time before other industries tried to come up with ways of exploiting the latest in telecommunications. Norwich Union, the UK’s largest motor insurer, is looking to launch a pay as you drive motor insurance policy, where the premium charged is directly related to when and where the vehicle is used.

A black box fitted to the car will collect real-time data such as the time the car is being used, where it is being driven and for how long. This data will then be used to calculate monthly insurance payments. Norwich Union has signed 5,000 people up to the pilot, which is due to be launched this summer.

IBM is set to provide the telematic architecture, hardware and software, while the Orange mobile phone network will be used for data transmission. Orange wants to generate more of its revenues from mobile data, and plans to use its experience of developing ‘pay-as-you-talk’ services to help Norwich Union. The pilot is expected to last up to two years before being commercially available.

In theory this seems like an excellent idea as it will enable more sophisticated underwriting and those that use their cars less will gain by way of cheaper insurance premiums.

However issues such as the cost of installing the technology and the fear of ‘big brother watching’ may result in the idea not being viable. To try and allay these concerns, all information gathered will be subject to data protection controls.

Doug Vallgren, Norwich Union’s sales and marketing manager said that bills would give general information, such as time and amount of travel, rather than specific journey descriptions.

Generally, insurers seem to think it is a good idea and will be watching the outcome of the pilot with interest. However, the market may not yet be ready for such a scheme.

Related Research: Datamonitor, UK Motor Insurance (DMFS1533)

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