Norwich Union has scrapped a high-tech vehicle insurance plan that tracked drivers using Global Positioning System (GPS).
The "Pay as you drive" plan from Norwich Union was intended to give drivers a more flexible option for covering their vehicles based on the actual circumstances under which they were driving, by watching where they drove, their speed and at what time of day. Cheaper rates were offered for off-peak driving.
But after two years, a slower-than-expected installation of in-car GPS devices by vehicle manufacturers put the insurer at an endless red light. The insurance plan has been "paused" for now, said Erik Nelson, senior media relations manager for Norwich Union.
However, "we have every belief that telematics-based insurance is going to be a main driver in the insurance industry," Nelson said.
Norwich Union gave some of its customers GPS devices to install in their cars to make up for the shortfall, but that proved too expensive for the insurer. Also, not enough customers were signing up, Nelson said. More than 10,000 were using system, he said.
Nelson dismissed the idea that consumers were worried about their privacy being compromised by a breach in the system. "That's not something we have ever observed," he said.
Norwich Union said the data would be processed in line with the Data Protection Act of 1988, which sets guidelines in the UK over how personal data should be handled.
The vehicle data was handled in some form by at least four companies: Norwich Union, the insurer's appointed market agency and other contractors handling back-end systems.
Recent data breach incidents in the UK may not have bolstered drivers' confidence to sign up. Norwich Union was hit with a record £1.26 million (US$2.52 million) fine by financial regulator, the Financial Services Authority, in December 2007 over lax data security.
Nearly a dozen fraudsters successfully impersonated customers when phoning call centres and cashed in on insurance policies. The fraudsters tried some 632 times in 2006 to scam the insurer and 74 of those attempts were successful. Losses were put at £3.3 million.
For the "Pay as you drive" policy, Norwich Union partnered with Trafficmaster, a company that specialises in fleet tracking, traffic management and satellite navigation.
Data transmitted from the vehicle's GPS device was encrypted and transmitted over a mobile network, according to information still on Norwich Union's Web site.
The GPS device is assigned a unique code, which the insurer said does not store information such as the registration, engine serial number or the driver's name address or phone number. However, the GPS device's code is eventually matched after the data transmission is complete to the person's insurance policy number to enable billing.
Norwich offered two tariffs, one for drivers under 24 years old and then those between 24 and 75 years old. The younger drivers were billed 3 to 4 pence per mile from 6 a.m. to 11 p.m., when the rate then rocketed to £1. Nelson said statistics show that's when those drivers have the most accidents. The result: young drivers drove less at those hours and Norwich paid out less in claims.
Older drivers were billed on a variety of factors - whether the road was single or double lane, the time of day and where the person was driving, Nelson said.
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