The UK’s biggest insurer is pulling the plug on its “pay as you drive” insurance scheme. Norwich Union has failed to tempt enough motorists to buy the telematics-based product in the 20 months since its high profile launch.
Here I must come clean. I am a devotee of PAYD. I was among the first volunteers in Norwich Union’s beta trial three years ago and switched fully to PAYD a year ago, attracted by the technology, the likelihood of reducing my annual premium by 35% and the equitable basis of the scheme. It has always seemed fair that the fewer risks I take, the less I pay and this system is smart enough to know if I’m driving on the safest roads at the safest times. Unfortunately I must now try to find a new product.
Collective loss of confidence
But Norwich Union’s decision is much more than just a personal blow. It is a sad day for telematics in general and for flexible road user charging schemes in particular. There is a real risk that Norwich Union’s high profile failure to get telematics for tracking and charging into a large market could undermine future attempts by other organisations and agencies.
Despite comments by a company spokesman that Norwich Union believes in the future of telematics, there is a real danger that its sudden withdrawal will undermine confidence in other projects being trialled in Europe and the US.
Stick with it
Norwich Union pulled out only because it couldn’t make enough money, which, with hindsight, is hardly surprising considering the structure of the scheme. The company will not reveal how many vehicles were fitted with the GPS aerial, data logger and GSM chip, but up to 5,000 signed up for initial trials that began in 2004 using IBM-sourced equipment.
The results of the trials encouraged Norwich Union to launch PAYD for young drivers the following January and a product for all drivers in 2006. By then it had placed a five-year order for 10,000 extra units, this time from Trafficmaster, a UK telematics and traffic information provider. So, all in all, it’s reasonable to estimate that the product attracted less than 15,000 customers.
This number would be small-fry for Norwich Union, particularly as the most likely customers were those who drive relatively little and, consequently, have low-priced premiums. There can be less profit in a low-price policy and, with so few buying the product, it clearly didn’t make the money.
What’s more, the scheme actually encouraged people to change their driving behaviour and so reduce the amount they paid each month, cutting even deeper into the insurer’s potential to profit.
So, far-sighted people involved in telematics for business and government should not lose heart. One company has killed one product because it didn’t fit its business plan. Telematics is still needed, now more than ever.
And if anyone leaps in to fill the gap left by Norwich Union, there’s one customer here who is ready to sign up, once more, to PAYD.
I’d like to find a contact at Norwich Union so that I could discuss with them a flexible carpooling premium discount. Carpoolers are reported to be safer drivers, and in flexible carpooling we will be able to warrant the number of days a members car was not driven all the way to the usual destination. It is not exactly PAYD, but closely related. Can you pass this on to the appropriate person who could connect me with the best person at NU?
- Our contact at Norwich Union left recently - we suggest you try the main number on +44 (0) 800 068 5637
Paul Minnett, managing director, Trip Convergence