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Pay how you drive motor insurance

Telematics motor insurance policies, often known as ‘pay how you drive’ or ‘black box’ insurance, take into account how the vehicle is used when setting the premium. This allows an insurer to offer premiums that are more tailored to the users of a vehicle than is possible with a traditional motor insurance policy.

Telematics policies primarily use GPS technology to measure how a vehicle is being driven – insurers then use this information to make decisions about risk based on driving performance. This information is considered together with other traditional risk factors, such as a driver's age and where they live, to set premiums. ‘Safe’ drivers will usually benefit from lower premiums than ‘less safe’ drivers. 

Insurers will assess driving performance in different ways, but most will consider things such as the number of miles driven, the types of roads used, and speed and braking patterns.

What is pay how you drive insurance?

The technology may be in the form of a computer built into the car, it may be a small device – commonly known as a ‘black box’ – that is fitted by the insurer, or it may be a smartphone app.

For more information on telematics insurance see Telematics Motor Insurance – ABI Consumer Guide, which sets out what you can expect from a telematics policy.

The ABI has also produced a good practice guide for providers of telematics-based motor insurance to help ensure that customers better understand telematics motor insurance products and are being treated fairly and in line with relevant legislation and regulation. The guide is voluntary, but has been developed in consultation with insurers, and with assistance from the British Insurance Brokers’ Association, and the Financial Conduct Authority (FCA) – which regulates the insurance industry. For more information see Selling Telematics Motor Insurance Policies – ABI Good Practice Guide.