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What are the main characteristics of pay-as-you-go insurance schemes for young drivers?

Mixing the ideas of having a mobile phone on a contract and on pay-as-you-go, the schemes tend to charge a monthly fee, which can be regarded as equivalent to line rental. The peak rate and off-peak tariffs are similar to the idea of adding talk time to your mobile phone.

This gives the driver a clear idea of how much their car use is going to cost them on a month-by-month basis. They also have the flexibility to use their car when they want, knowing how much it's going to cost them (petrol plus insurance).

Pay-as-you-go insurance works by installing an in-car black box which uses Global Positioning Satellite (GPS) technology to record the journeys made. These data are passed to the insurer via the mobile phone network. The premium you pay is based on the journey times and duration of travel.

So the basic principles of pay-as-you-go insurance are that:

• The car owner pays upfront an insurance premium of around a third of a standard policy.
• They then pay a monthly charge based on:
  • The time each journey was made.
  • The distance driven, and
  • The type of road used.

And for 18-23 year olds, there is the simple system of just one peak rate and one off-peak tariff.

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