Electronic 'black box' could reduce road congestion

But new technology might increase insurance premiums, warns William Kay

The Government could be let off having to impose congestion charges across the country by a video-sized box Norwich Union wants to put in every car. NU said this week it has signed a deal with IBM and Orange UK to provide the technology and telecommunications for what it calls its revolutionary Pay As You Drive insurance scheme.

The box, which can be kept under the dashboard or in the boot, will collect data about where the car is at any time, how many miles it covers and for how long it is being driven in any period. At present, car insurers depend on drivers to tell them their correct mileage.

NU intends to calculate insurance premiums based on when, where and how often the car is used. It will also be able to track the vehicle if it is stolen, and report an accident instantly, possibly saving lives.

But Robert Ledger, the executive in charge of the project, admits that by aligning premiums with use the scheme may inhibit mileage in the same way as Mayor Ken Livingstone's London congestion charge. He says: "We are speaking to government departments interested in our project's implications for traffic flows. It could discourage people from taking their cars into town centres, because such journeys may attract higher premiums."

Apart from avoiding the political hostility in congestion charge schemes, the NU project will be considerably less expensive than setting up CCTV cameras round a designated charging zone. The plan is that policyholders will get a monthly premium notice showing calculations related to the type of use. Although motorways have the fewest accidents per mile, they may come out differently when calculated on accidents per journey. Mr Ledger says: "We don't know whether this will mean higher premiums, but it will mean fairer and more accurate premiums. The more we know about a driver's pattern of behaviour the more precisely we can calculate a fair premium." He also cited greater visibility, allowing policyholders to see how their premium is made up and modify their behaviour if they want to reduce it.

NU has an exclusive agreement covering the UK and Europe with the technology's pioneer, the US insurer Progressive, to use data collected via telematics and the company's unique pricing method to calculate premiums. Progressive, based in Ohio, is the fourth largest insurer in America.

Bill Pieroni, general manager for IBM Global Insurance Industry, says: "Telematics technology is already proving its tremendous value to drivers and passengers, with added safety features, new services, and entertainment. Now we want to help determine whether this on-demand approach to insurance coupled with IBM services and infrastructure can benefit the insurance industry and motorists with more accurate insurance premiums based on actual vehicle usage."

Pay As You Drive is to be piloted this year with 5,000 volunteer motorists. It is not expected to be launched commercially until 2005, because of the time required to build up a meaningful pattern of claims experience. Mr Ledger adds: "We have an awful lot to learn about how people use their cars, and the risks they run of an accident. To that extent, we don't what type of driver will be attracted to this system."

Anyone interested in taking part in the pilot, which will last up to two years, can register at www.norwichunion.com or e-mail payasyoudrive@norwich-union.co.uk