Your Money: This cover will drive us crazy

If you have to leave your car in the garage to get a low premium, what's the point of it in the first place?

Melanie Bien
Sunday 16 March 2003 01:00

Pay as you go is a great invention. Take mobile phones: the concept means you don't have to shell out 20-odd quid a month for a contract before you've even dialled a number. Unfortunately, the calls themselves cost more than on a contract because the mobile phone companies have to make their money somehow. Thanks to the innovation, however, a lot of people who couldn't afford a mobile in the past now have access to one.

And it really is all systems go for pay-as-you- go because the idea has spread to insurance – though strictly speaking I mean "pay as you drive", a new insurance policy that is being driven by Norwich Union. IBM and Orange UK have developed a telematic device, or black box, which sits in a customer's car and records when, where and how often the vehicle is used. Norwich Union will use this information when it calculates insurance premiums.

Undoubtedly, the insurer will benefit, as will motorists who don't actually do much driving. But the whole concept of pay-as-you-go is freedom; pay-as-you-drive is the opposite.

The principle is disturbing. Nobody wants to pay more for their insurance than is absolutely necessary, but if you have to leave the car in the garage to get a low premium, what's the point of it in the first place? Cover is there to deal with the unknown. But if your insurer knows you take the kids to school in the morning and pick them up at 3.30pm, you will face some of the highest premiums because, statistically, this is when most accidents happen.

What's more, just because you happen to be driving on urban roads in the rush hour, it doesn't follow that you are actually going to have an accident. It might be more risky but it doesn't mean you are automatically going to prang the car in front. Indeed, you may well drive more carefully due to the increased risk.

The RAC says mileage and claim rates are not directly related. The pensioner driving down a remote country lane once a week might be more likely to smack into a wall. But the black box means his premiums are likely to be a tiny fraction of the regular urban rush-hour driver.

Pay-as-you-drive will mean lower premiums for some, while those deemed higher risk will be forced to switch to standard policies from other insurers in order to get a competitive deal.

But as far as those low-risk drivers with cheaper premiums are concerned, the question remains: is a £50 saving enough to compensate for big brother constantly peering over your shoulder?

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