What Car? Q&A - How does pay-as-go insurance work?

Q: How does pay as you go insurance work, and is it the best bet for a young driver?

A: There are currently two insurers offering pay-as-you-go insurance products, where you pay for insurance depending on the way you use your car. More Than and Norwich Union offer these services.

Using an in-car device and GPS technology, your journey information is sent to a central computer, and your premiums are worked out based on when and where you drive.

More Than's Drive Time scheme is aimed at drivers aged 18-25. It promises to cost 40% less than a standard policy, as long as drivers only use the road between 6am and 11pm. Driving in these 'red hours' of night incurs a £25 penalty. This scheme rewards young drivers for avoiding the roads at these times as accidents are most likely to happen. For more information, visit www.morethandrivetime.com.

Norwich Union charges a fixed monthly fee for its 'Pay as You Drive' scheme, as well as costs based on the miles you drive. It's now available to customers up to the age of 65. For younger drivers the premium will be more expensive if they drive at night, between 11pm and 6am, but it includes 100 'free' off-peak miles each month.

For drivers over 25, it may help lower-mileage drivers who avoid the morning rush hour in urban areas. For more information visit: www.payasyoudriveinsurance.co.uk.