Based on telematics technology, “pay how you drive” insurance relays information on the individual’s driving behaviour back to the insurers, with the incentive of lower premiums for lower-risk drivers.

To clarify how the technology should be used and what it can offer, the ABI has produced two guides, in association with the British Insurance Brokers Association (BIBA).



The first guide is for users and explains:


• What to expect from a pay how you drive policy.


• The importance of driving behaviour in affecting the cost of motor insurance.


• Other benefits that these policies can offer, such as tracking to help locate your vehicle if it is stolen.


• Safeguards to ensure your recorded driving information is kept secure and your rights to access this data.



The second guide is for the insurance industry, and defines good practice to ensure that customers buying these products continue to be treated fairly and their data is protected. The guidance sets out:


• Actions for managing and handling telematics data to ensure compliance with data protection legislation and maintain consumer confidence in the industry’s use of personal data.


• Steps to ensure customers are treated fairly and minimise instances of customer detriment.



Kate Carr, the ABI’s head of fraud and specialist lines, said: ‘”Pay how you drive” policies have the potential to dramatically change the motor insurance market. They have been developed to recognise and reward good driving behaviour through lower motor insurance premiums, and to encourage safer driving generally.



‘The emergence of telematics technology presents a new challenge for insurers as they design new products that best meet the needs of their customers. The guidance released today will help insurers develop products that are consumer friendly, while also helping consumers understand whether a telematics policy is right for them.’