Motorists could be insured by the mile under a new scheme in which they are billed on when, where and how far they drive.
Launched today by Norwich Union, the Pay As You Drive insurance provides policyholders with an itemised bill based on car usage.
Under the policy, the time of the day, type of road and mileage of the drive is taken into consideration when working out the charge to customer.
Data collected from GPS devices installed by Norwich Union will be used to work out how much drivers need to pay on a monthly basis.
The insurance, which claims to be the first of its kind in the UK, has been launched following a pilot of 5,000 motorists, who have been trialling the service since 2004.
Research released by Norwich Union showed that two-thirds of all drivers and nine out of ten low mileage motorists said they would consider switching to a pay as you drive system.
The insurer will go live with two policies catering for different customer groups.
A policy for motorist aged 24 to 65 will include costs of 1p a mile for off-peak motorway driving.
A second insurance, for 18 to 23-year-olds, will discourage nighttime driving, with motorists charged £1 a mile during the high-risk accident time between 11pm and 6am.
Iain Napier, director of Pay As You Drive insurance at Norwich Union, said: "The launch of Pay As You Drive insurance will give motorists access to insurance specifically tailored to them and their driving habits, potentially rewarding them with cheaper premiums.
