Norwich Union has begun trials of a new pay-as-you-go car insurance policy. Drivers will be tracked by a 'black box' which will record data about their journeys, and charge them according to how risky any particular journey is.

The idea is that premiums will be matched precisely to the individual: those who use their cars infrequently will pay far less for their insurance, but those who make frequent night time journeys, or who drive a lot, will pay more.

"Most drivers are not going to like the idea of their insurance company knowing their whereabouts 24 hours a day," AA spokeswoman Rebecca Rees told The BBC. She argued that switching to a pay-as-you-go charging structure would be unpopular with drivers concerned about "the big brother element".

Despite these concerns, Norwich Union says applications to take part in the trial flooded in - the scheme could have been filled twice over.

Volunteers have a black box device, about the size of a DVD box, fitted to their cars. It tracks vehicle usage in real time and works out the insurance premium on a per mile basis. The calculation involves the black box data, along with standard insurance criteria such as sex, age and insurance history.

In the US, Progressive Insurance, has already piloted a similar scheme. It is offering customers up to a 25 per cent discount on their insurance, with an automatic reduction of five per cent in exchange for their driving data.

Other reductions depend on the driver modifying his or her behaviour: for example, a further discount is available if drivers stay off the road between midnight and 4am. ®

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