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Can You Save Money With Pay As You Drive Car Insurance?

Article by Simon Christopher
Article added: 3/1/2008 - Last updated: -
Rating: 4.50 4.50 (2 votes)

When Norwich Union introduced their innovative Pay As You Drive car insurance product last year, they thought it would be a big seller, and it was. In fact, it was so popular that it was oversubscribed and the company had to suspend accepting new applications until their supply of "black boxes" caught up with the demand for lower priced car insurance.

Pay As You Drive is the first car insurance product that really takes advantage of emerging technology in a way that benefits both insurers and their customers. With traditional insurance, drivers pay a fixed monthly premium based on a number of factors, including the estimated mileage that they’ll drive in a year, the type of car, where they park their car, and whether or not they use their car to commute to work. The premium takes into account the driver’s estimated risk of being involved in an accident – which varies, of course, with the amount you drive and the type of driving that you do.

Pay As You Drive Links Your Premium to Your Driving

With Norwich Union’s new PAYD insurance policy, you get a completely personalised premium every month, depending on how much, when and where you drive. If you spend a weekend motoring up and down the coast, your insurance for the month will be a bit higher than the month that your car sat in the garage while you were away on holiday. Your premium is based on the hours of the day that you drive, the type of road on which you drive and the amount of mileage you put on your car each month.

How Pay As You Go Insurance Works

When you sign up for PAYD, Norwich Union will pay to install a little black box – about the size of a CD case – in an inconspicuous place in your car. The box is a mini-GPS device which will record your driving habits and charge you accordingly. Among the things that it is capable of recording are...

  • the time of day when your car is being driven
  • where your car is being driven
  • the number of miles that your car is driven

This information is transmitted to Norwich Union. Each month, the company will send you an itemised bill with your charges for the month. You’ll also pay a flat fee per month to account for other standard cover against fire, damage and theft. That amount remains the same month to month. Your mileage charge will vary according to the driving that you do.

How Much Does Pay As You Go Car Insurance Cost?

The charges depend on your unique personal driving habits and all the other factors that traditional insurance takes into account. There are two different tiers of pricing based on age – 18 to 23 year old drivers, as expected, pay considerably more than drivers who are 24 and over. A typical driver will pay around £11 per month flat fee, and then pay from .41p to 4.63p per mile driven according to the type of road and time of day.

Will You Save Money with Pay As You Drive Cover?

If you're a low mileage driver, chances are that you will save money if you switch to pay as you drive cover. According to Norwich Union, if you drive 6,000 miles or less per year, you could save up to 30% with Pay As You Drive.

PLEASE NOTE: The guidance published in this article is for information only and does not constitute financial advice or a recommendation of any particular car insurance product or company. If you are in any doubt please consult an independent insurance adviser. A database of advisers in your area is available at

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