As many as 5000 motorists are set to road-test a revolutionary technology that could mean motoring insurance premiums in the future are calculated on how often, where and when people drive their cars.

For the first time motorists will begin to understand what drives their premiums, ultimately allowing them to have greater control and to adjust their driving patterns to reduce their motoring costs, says Norwich Union’s who is piloting the "Pay As You Drive" insurance scheme.

"Black box" telematics devices are currently being fitted into 5,000 Norwich Union customer cars across the UK. The cars involved in the pilot scheme belong to a wide range of motorists - from low mileage users to long distance drivers, those who live in rural areas to town dwellers.

The motorists are already Norwich Union customers who have been offered the chance of special insurance rates when the scheme is fully operational. The company has been overwhelmed with applicants.

The black box is smaller in size than a DVD case and is installed either in the boot or passenger area of a customer’s car. The box records real-time vehicle usage and sends the data to Norwich Union securely using similar technology to that used by mobile phones and GPS receivers. The system monitors the complete journey and records the actual route taken and at what time of day. It can also determine things like stops at junctions and speeds used.

The pilot will last for up to two years and once the findings are evaluated, Norwich Union will confirm whether "Pay As You Drive"™ (PAYD) insurance will become available to all customers.

In theory, the insurance company will be able to obtain information drivers might not want them to have such as speeding and long spells without stops but on the upside the system could be used to track car thieves.

The insurer says that the scheme will be ideal for the safety and security-conscious motorist.

Norwich Union predicts that the system could be used to give personal driving advice such as which journeys could be made cheaper, which roads are more dangerous and at what time of day.