By Infrequent motorists could save hundreds of pounds a year by switching their insurance policies to those that track how many miles they drive.
So-called “pay-as-you-drive” insurance relies on using a telematics box fitted to the car, either by yourself or a mechanic.
This then sends information to the insurer by GPS to track how many miles you have driven.
Insurance using telematics “black boxes” is normally aimed at younger drivers. The black box checks how safely they drive, and the insurer prices premiums accordingly.
But pay-as-you-drive insurance is different. The box’s main purpose is to track mileage, although some providers will send warnings or cancel policies for acts such as speeding.
Pay-as-you-drive policies are often taken out by older drivers. Oliver Baxter, of By Miles, a pay-as-you-drive broker, said the firm’s typical customer was aged between 30 and 50.
The insurance usually requires motorists to pay a small upfront fee, plus a fee per mile driven.
Mr Baxter said a 40-year-old graphic designer in Brighton driving a Ford Fiesta Zetec 4,000 miles a year could expect to pay £318.84 by swapping to paying by the mile, saving £175.74.
The premium would be a fixed annual cost of £170.83 and then 3.7p per mile.
Pay-as-you-drive can save you cash for two reasons.
Firstly, the fewer miles you drive, the less likely you are to make a claim and so the cheaper your policy should be.
Traditional car insurance policies require you to guess how many miles you will drive in a year upfront. Most of us will overestimate this number to be on the safe side, which means paying more than we have to.
Secondly, if you are a low-mileage driver then you are almost certainly overpaying to subsidise higher-mileage drivers who live nearby.
This is because part of the cost of your car insurance will be based on the typical driving habits of people in your postcode.
This includes how far they drive. Roger Ramsden, of telematics broker My Policy Group, said: “Undoubtedly, low-mileage drivers, of whom older people are one cohort and people living in cities are another, are almost by definition paying above average.”
If the local average is 10,000 miles a year, you drive 5,000 miles and your neighbour drives 15,000, the chances are you are paying more than you should and they are paying less.
One driver, Neil de Carteret, 42, of Woolwich Arsenal, London, said he paid £700 a year to insure his Mazda RX8, and is now saving £300 after swapping to pay-as-you-drive cover.
Mr de Carteret said the final straw was his insurance premium edging up every year for no apparent reason, until he was being quoted up to £1,000 for traditional cover.
He said: “It is massively worthwhile. For the amount that I use my car, the traditional insurance policies I could get were a ridiculous amount of money.
Insurance was by far and away the most expensive aspect of having a car.”
The idea of paying lower premiums by more accurately assessing risk is also moving into areas such as cycling cover and insuring gadgets.
For example, apps such as Trov let you turn insurance on and off for valuable electronics including cameras and mobile phones.
If you leave the house with a gadget, you can switch the insurance on as you are more likely to lose or damage the item than if it was safely indoors.
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