The pilot scheme organised by Norwich Union will see 5,000 cars fitted with a black box until 2004 to assess whether mileage-based insurance is feasible. Although the main focus of the programme is retail drivers, the insurance giant will be looking at other sectors, including the fleet industry.
Douglas Vallgren, sales and marketing manager at Norwich Union, warns it could lead to significant changes in insurance costs for some drivers or fleets.
He said: 'It may emerge that motorways are safer than ordinary roads so long-distance drivers may benefit from the scheme, but we may find that those driving more miles will pay a higher premium.'
Under the pilot scheme, a black box will be fitted to each vehicle, allowing data to be transmitted back to the insurer using technology from IBM and Orange.
As well as monthly billing, the system could also be used to offer associated in-car services, such as emergency assistance and real-time route planning.
The launch follows a report from the Institute of Public Policy Research (IPPR), an influential think-tank, which claimed such systems could slash unnecessary car use.
A spokesman for the IPPR, said: 'Insurance companies would still alter the cost per mile based on location, age and risk factors, but it would also provide an incentive for people to drive less.'
Fleets need to consider the reaction of employees to having black boxes fitted to their vehicles, Arval PHH warned this week. Mike Waters, its head of market analysis, said fleets need to assess the cost of implementing a system and also consider privacy issues.
He said: 'The cost of fitting the technology to monitor the vehicles needs to be compared with the benefit of having a reduced premium. From a fleet perspective, there are data protection issues. You need to consider how an employee would feel about having their vehicle tracked, especially if it is a perk.'