Direct Line is the latest car insurance company to launch a 'pay how you drive' telematics-based insurance policy.
The news comes as the Government prepares to publish a green paper, which will discuss the role of so-called 'black boxes' in reducing insurance premiums and cutting the amount of accidents involving young drivers.
According to the Department for Transport (DfT), 20% of people killed or seriously injured on the UK's roads are aged 17-24, despite making up just 8% of drivers.
Motorists who join Direct Line's new DrivePlus policy can choose between a black box fitted to their car, or downloading an app on their smartphone. Both devices use GPS tracking technology to monitor aspects of driving style, such as speed, acceleration and braking.
Direct Line is offering a 20% discount for drivers aged 17-20 who opt for the car-mounted box, and up to 10% for those choosing the smartphone app.
Any driver, regardless of age, can download the app and get a 10% discount when they drive 200 miles before getting a quote from the insurance company.
Tom Woolgrove, managing director at Direct Line, who announced the new policy at a Parliamentary Advisory Council for Transport Safety (PACTS) debate on young driver safety, revealed two thirds of parents responding to a Direct Line survey said they would feel less worried about their children if they had a telematics device fitted to their car.
In addition to 'pay how you drive' insurance policies, the green paper will also consider the merits of graduated licencing, stricter alcohol limits and restrictions on passengers for new drivers. Also on the agenda will be night-time curfews, new driving test elements such as motorway driving, and making safe driving part of the National Curriculum in schools.
Addressing the PACTS forum, Jessica Matthew, deputy director at the DfT, said all ideas would be considered in the paper, but that the jury is still out on measures that involve restricting freedoms.
She said: 'With things like night-time curfews there may be safety benefits, but the economic benefits are harder to see. In the midst of a recession, making it harder to get to employment or education may not be the right thing to do.'
The DfT Green Paper is due to be published in the autumn.