Is 'pay as you go' insurance the way forward? Jane Hall reports.
Linda Jones has been under surveillance for the past eight months.
Every time the mother of three leaves her home and drives off in her 12-month-old Toyota Previa she is followed.
Her tracker keeps a meticulous record of times, where she has been, how fast she has driven and how many miles she has gone.
And when her journey is over, he sits and patiently waits for Linda to once again get behind the wheel of her people carrier before again noting her every move. Who is keeping a Big Brotherly eye on the registered childminder and foster carer? Is it the secret service? Is it the police?
No, it's a black box smaller than a DVD case that has been installed in the boot of her vehicle. Every time she starts the engine and drives off Global Positioning Satellite (GPS) technology records her trip. Then the box transmits information to its employer via the mobile phone network.
But none of this is done in secret, Linda, 46, is fully aware of the black box in her life. She is part of a 5,000-strong two-year national pilot scheme road testing Norwich Union's revolutionary pay-as-you-drive (PAYD) motor insurance.
The technology, similar to that of mobile phones, allows the insurer to bill motorists monthly for each mile driven. The scheme - already piloted in America by Progressive Insurance - could substantially cut premiums for many low-mileage car users, although it may mean more expensive cover for those driving long distances. Norwich Union has exclusive rights to market the technology in the UK and Europe, and according to the firm's spokesman, Erik correct Nelson, the pilot is progressing well.
While Linda is only three-quarters of the way through her first year as a volunteer on the UK pilot, she believes she will save substantially on her annual £300 car insurance premium.
"I only cover between 6,000 and 7,000 miles a year, with a lot of short journeys. But with several children to ferry about my car is essential. Pay-as-you-drive is a good idea for a low-mileage driver like me."
Linda, who is married to Chris, 48, an HGV driver, says several of her friends have expressed an interest in the system, along with her two eldest children, Rebecca, 24, a secretary, and Steven, 23, a builder. Her youngest child, Abby, is 13.
"Car insurance costs a lot for young people, and Rebecca and Steven would be interested in anything that cuts the cost. Neither of them drives long distances and they could save money," Linda says.
Young drivers - who can find themselves paying 10 times the premiums of older people - are struggling to afford the cost of motoring. Insurance premiums for even the most basic car can cost anything between £1,500 and £2,000 a year for the under 25s. To this end, Norwich Union earlier this year introduced a PAYD pilot scheme for 1,500 18 to 21-year-olds which it claims could cut premiums for the safest customers by up to 30pc - but charge £1 a mile for the riskiest journeys.
Customers are able to reduce their premiums to more affordable levels by driving mainly during `off peak' times when statistics for the 18-21 age bracket show they are at much greater risk of death or serious injury.
Norwich Union still uses the traditional rating data - gender, postcode, accident record and type of car - and sets tariffs per mile for each driver based on this information. The best young drivers pay for their insurance at the rate of 6p per mile per day, with the first 100 miles of daytime motoring coming in free.
Norwich Union's initiative is showing the way ahead for motor insurance and has won the support of groups such as the AA and insurance brokers.
Commenting on the young driver pilot, Richard Mason, director of internet-based insuresupermarket.com, says: "This move by Norwich Union is a bold innovation and a great idea to encourage younger people to be safer drivers, while also delivering lower cost insurance.
"We see first-hand on a daily basis just how expensive the quotes supplied by major insurance brands are to these young drivers - literally running into thousands of pounds - so we fully support any initiatives that can help bring these costs down. The major reason why one in 20 drivers in the UK has no insurance is down to cost."
But it's not just motoring insurance that sets people's financial thermometer boiling. Premiums across the board have gone through the roof, and many households - either because of cost or because they are in flood risk areas - are no longer adequately covered for buildings or contents. Would a PAYD approach to all insurance be the answer?
It is a move that would meet with the approval of Linda Jones: "I think it would be a good idea if you could only pay for what you used. We keep hearing that across the board we are all having to pay for other people's claims, but why should I?
"If I am a safe driver or don't drive many miles, why should I have to pay for someone who is reckless? If I go on holiday why should I have to pay for all sorts of add-ons I don't want?"
To a degree, insurance is already tailormade for the individual. For example, household cover will take into account your postcode, whether you are in a high risk flood or subsidence area, how old your property is, whether it is used as a business or residential premises and so on.
Insurers will offer discounts for householders who are in a Neighbourhood Watch area, or fit security systems from an approved supplier, or take measures to prevent flooding.
And the motor insurance market also already charges a wide range of premiums, according to a well-established pattern of risks defined by age, car model, post code and the rest.
But could more be done? All the indications are that there will be a much wider range of policies and fine tuning of premiums in the future.
And it is technology - such as Norwich Union's PAYD black box and its flood map developed using technology which singles out homes prone to flooding with precision not seen before - that is helping to lead the way.
The new flood map identifies not only the exact position of each home and its height above sea level, but those in line for sharp increases in premiums and excess levels, and those which may deserve a cut in charges.
Many believe household cover won't just be about risk assessment in the future according to postcode, but that so-called geocoding of each and every property will play a bigger role - so the difference in sub-soil could mean a variation in premiums of perhaps around £100 in neighbouring homes, with clay being the most vulnerable.
The drive for all insurers will be risk mapping. In the future householders will have to keep an eye on how different insurers view particular risks - and with the increase in flood defences these risks can, and will, change.
Computers have, without a doubt, changed the way we all lead our lives, and have had a huge impact in the financial sector, from internet-based banks to the plethora of firms that now offer easy and fast quotes on everything from insurance premiums to mortgages.
Graeme Trudgill, correct technical services manager for the British Insurance Brokers' Association (Biba), says: "Insurance companies can now build in a lot of factors they couldn't before and things are becoming more tailormade. And in the future technology will also make insurance that bit faster and fairer."
Direct Travel recently launched a new, flexible, value-for-money backpacking insurance policy with cover starting from £23.56 for 90 days in Europe.
Specifically designed for travellers under the age of 37, it offers pay-as-you-go premiums so that consumers can choose their initial period of long stay travel up to a maximum of 12 months.
On top of this it is possible to extend the same policy at any stage during the travels for up to 18 months in total.
It additionally offers cover for over 100 different hazardous sports. These include such pursuits as bungee jumping and elephant or gorilla trekking. There is also an added premium option for more than 25 other hazardous sports, such as black water rafting and shark diving.
Graeme Trudgill doesn't think insurers will ever stop `risk-based' pricing, as he believes it is the fairest method. But now insurers have the technology to tailor products more effectively, so the market will open up.
"If you are only driving a few miles every week to pick up your pension, then why should you pay the same as someone who is driving thousands of miles a year?" he says.
"If you buy a safer car and take an advanced driving course, why should you pay the same as someone who hasn't?
"You can't change the fact that you are 18 years old, but you can choose whether you buy a fast sports car or an old banger. Many new drivers buy flashy cars, but maybe it would be better to buy something old so it doesn't matter if it gets scratched."
Benefits of Pay As You Drive insurance
One of the biggest advantages of PAYD insurance is the possibility of saving money, which is likely if you don't drive more than average.
Norwich Union says young drivers could see savings of up to 30pc a year off the cost of their premiums.
These savings are predicted to reduce the number of uninsured drivers and help lower-income families.
INCREASED CONSUMER CONTROL OF EXPENSES
Because the cost of insurance is based directly on the number of miles driven, you can take an active role in reducing the cost of your insurance by driving less.
It has been suggested that because consumers can actively control the amount they pay on insurance, they will want to drive less, which in turn will increase driving safety (because higher mileage motorists have more crashes).
Not only this, but emissions and road congestion would be reduced.
* Young motorists or parents who want their children to sign up to Norwich Union's PAYD For Young Drivers test product can visit www.payasyoudriveinsurance.co.uk or contact the PAYD insurance team at email@example.com
Although places on the other pilot have been filled, motorists who would like to find out more about the scheme and any future plans to bring the product to the market, should also contact the PAYD insurance team.