Norwich Union will this week launch its controversial ‘pay as you drive’ car insurance, where motorists are charged according to the distance and time of day they travel.

The insurance, which relies on ‘black box’ technology fitted in cars to log details of all journeys, has until now been offered on a trial basis, but Norwich Union will open the scheme to all its customers later this week.

It is expected to offer two products – one aimed at younger drivers and one for older motorists. People who use their cars infrequently in daylight hours will pay less, while those who drive at night, when accidents are more likely to happen, will face higher premiums.

However, the scheme is likely to be controversial because the government could eventually use the technology to charge drivers when they enter traffic-clogged cities.

The government believes that motorists ought to be charged up to £1.34 per mile to drive in city centres and on trunk roads at peak times to alleviate congestion levels. Norwich Union's black boxes could be adapted to make this feasible.

Civil liberties campaigners also fear the black boxes could be used to collect potentially incriminating data on drivers, such as breaches of the speed limit.

Under one of Norwich Union’s trials, 1,500 drivers aged 18-21 were charged up to £1 a mile if they used their cars between 11pm and 6am, falling to as little as 6p a mile during the day. At the end of the month, they received an itemised bill detailing the total monthly cost.

Drivers will also be required to pay a one-off sum, possibly about £200, for installation of the black box.

Norwich Union caused an outcry earlier this month when it raised motor insurance premiums by an average of 16 per cent , with hikes of up to 40 per cent for some drivers. It is thought these increases are being used to subsidise the ‘pay as you drive’ scheme.

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