The ABI has produced a good practice guide for providers of ‘pay how you drive’ insurance to
help ensure that customers are being treated fairly. The guide is voluntary, but has been
developed in consultation with insurers, the Financial Conduct Authority, which regulates the
insurance industry, and the Information Commissioner’s Office, which promotes data privacy for
This consumer factsheet, which is based on the good practice guide, sets out what customers
can expect from their ‘pay how you drive’ policy.
When selecting a ‘pay how you drive’ policy, you may want to ask the provider whether they
comply with the ABI’s good practice guide. If they do, you can be confident that you will be
What is ‘pay how you drive’ insurance and how does it work?
‘Pay how you drive’ insurance policies, often known as telematics 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
‘Pay how you drive’ policies use GPS technology to measure how a vehicle is being driven, which
insurers then use to make judgements about driving performance. This information is then
considered together with other traditional risk factors, such as the drivers’ age and occupation, 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.
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.
How will my driving behaviour affect my premium?
As each insurer will assess driving behaviour in different ways, how you drive will have a different
effect on your premium depending on which policy you choose. You should therefore always read
the policy terms and conditions before buying insurance to make sure you understand how your
driving behaviour will be taken into account, and how to make the most of your ‘pay how you
In some cases, premiums will be adjusted at set points during the policy to take account of driving
behaviour data. In other cases, premiums will stay the same throughout the life of the policy but
low risk driving behaviour will result in non-monetary benefits. For example, where insurance
policies set annual limits on mileage and charge extra for any miles driven above that limit, safe
driving may be rewarded with a free increase in the annual mileage limit.
Some other policies may not make adjustments to premiums or give non-monetary benefits until
the policy is renewed. Typically each insurer will offer reduced premiums when a policy is
renewed if you have shown you are a safe driver.Are there any other benefits?
While the benefits will differ between providers, ‘pay how you drive’ technology can offer a
number of benefits, including:
Feedback on your driving and suggestions and incentives to improve your driving;
Tracking services to help locate your vehicle if it is stolen;
Emergency services notifications in the event of an accident;
Improved claims handling – ‘pay how you drive’ data can provide independent, objective
evidence in the event of an accident, helping to assess liability for an accident quickly, and
reducing the risk of honest motorists becoming victims of fraud.
What if I am not a low-risk driver?
‘Pay how you drive’ policies will not always be cheaper than traditional policies. If you frequently
drive late at night or on unsafe roads, or you consistently drive badly, your insurer may consider
you a high-risk driver.
Every insurer will respond differently to high-risk driving behaviour. In some cases high-risk
drivers will simply not be entitled to premium reductions or other non-monetary benefits. In other
cases high-risk drivers may face a premium increase, a specific one-off charge, or in the most
serious cases, cancellation of the policy.
You should always read the policy terms and conditions before purchasing ‘pay how you drive’
insurance to ensure that you understand how high-risk driving behaviour will be taken into
account and to help you decide if this type of policy is right for you.
What if other people drive my car?
Most ‘pay how you drive’ policies will assess how the vehicle is driven overall, rather than just
how it is driven by the main driver. This means that the way any named drivers or other
individuals entitled to use your vehicle drive will be used by your insurer to calculate your
premium and/or any other non-monetary benefits. This is similar to a traditional motor insurance
policy, where adding extra drivers can change the price of your insurance.
Are there any restrictions on when or where I drive or other hidden costs?
Some ‘pay how you drive’ policies place limits on where or when a vehicle can be driven. For
example, some policies apply a fixed charge if the vehicle is driven outside set hours. These
restrictions are typically intended to limit high-risk behaviour, and by agreeing to such restrictions,
you may reduce the cost of your premium.
However, many ‘pay how you drive’ policies have no such restrictions, so you should always shop
around to find the policy which works best for you.
Where a ‘pay how you drive’ policy uses a black box, there may also be a cost associated with
having the device fitted or removed. Furthermore, there could be a charge to recover the cost of
the device if you cancel the policy early. The exact charges should be explained in the information
relating to your policy.
Will my ‘pay how you drive’ data be secure?
Insurers have a legal obligation under the Data Protection Act 1998 to protect your personal data.
Any insurer that did not protect your personal data could receive fines and other penalties under
Who will my ‘pay how you drive’ data be shared with?
Typically, insurers use specialist companies to help them deliver their ‘pay how you drive’
policies. These companies will often have access to your ‘pay how you drive’ data. Sharing your ‘pay how you drive’ data with other third parties can also enable you to benefit from
additional services, such as breakdown cover, or special offers from partner organisations.
However, your insurer should always ask your permission before sharing your data with any third
parties who aren’t involved in delivering your insurance policy. The exception to this is where
data is shared with other insurers for the purpose of detecting and preventing insurance fraud.
Insurers will not share your data with the police or any other authorities unless they are forced to
do so by a court order or you have given your express permission to do so.
Most ‘pay how you drive’ policies provide regular feedback to customers on their driving
performance via an online web portal. Therefore, if you are a named driver on a ‘pay how you
drive’ policy, data about your driving may be shared with the policyholder through the web portal.
For example, if the policyholder is one of your parents or your spouse, they may be able to
monitor your driving behaviour through the web portal. Your insurer will seek permission to share
this information when the policy is purchased.
What are my rights to my ‘pay how you drive’ data?
Most ‘pay how you drive’ policies provide regular feedback to customers on their driving
performance via an online web portal. Under the Data Protection Act 1998, you have a right to
access any data that is personal to you, which may be more than is provided via the portal.
Asking for this information is known as making a ‘subject access request’ and there is usually a
small charge for this data.
Your insurer should get the consent of all the drivers named on your policy before releasing any
personal data that may relate to them.
For more information on subject access requests, check the Information Commissioner’s
What happens after I cancel my policy?
This depends on how your ‘pay how you drive’ policy was provided:
If you have a black box installed in your car, you should be given the option to have the
device taken out. There may be a charge for this. If you don’t want to pay to have the
device you removed, your insurer will either stop the black box transmitting data or, if this
is not possible, it will make sure that the data it transmits cannot be used.
If your policy used a smartphone app, data will stop being collected once you have
deleted the app.
If your vehicle has the technology built-in, it may not be possible to remove it. In these
cases, your insurer will make sure that the data that your vehicle transmits is no longer
received by the insurer.
In all of these scenarios, the insurer will no longer be able to see or use your data once the
cancellation has taken effect.
ASSOCIATION OF BRITISH INSURERS