Own a car but rarely use it? Insurer launches pay-as-you-go policy so occasional drivers can dodge high-cost premiums

Drivers have to pay £10-£30 for a monthly subscription that covers the car when not in use
You have to pay from £1.20 per hour each time you want to drive the vehicle
It's aimed at younger drivers who live in cities and cover less than 4,000 miles a year in their car
Cuvva says it could save some drivers up to 70% on a standard insurance policy

Published: 10:34 GMT, 27 January 2017 | Updated: 12:57 GMT, 27 January 2017

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A provider specialising in pay-as-you-go car insurance has created a new policy for vehicle owners who drive only occasionally.

The new product - a first for the UK market - requires the car owner to take out a monthly subscription of between £10 and £30 that then has to be topped up for each hour the vehicle is used.

Cuvva, which already offers by-the-hour insurance cover for individuals to drive vehicles belonging to friends and family, said car owners will have to pay from £1.20 each time they want to get behind the wheel.

A monthly insurance subscription covers your car when it's not in use for £10 to £30, then drivers have to pay an additional fee -from £1.20 - for each hour they want to drive

The cover is aimed at 'young city dwellers who pay high insurance premiums for cars that are driven for fewer than 4,000 miles a year', the Edinburgh-based insurer said.

According to Department for Transport and DVLA figures, there are approximately six million cars in the UK that are described as being driven 'very infrequently'.

Cuvva said these low-mile drivers are forced to pay hefty premiums despite spending little time on the road, effectively subsiding higher-mileage motorists.

As a way of cutting their costs, it offers drivers the choice to pay a monthly subscription that ranges from £10 to £30 depending on the car and where the person lives.

WHO IS CUVVA AND WHAT IS PAY-AS-YOU-GO INSURANCE?

Cuvva was the first ever tech platform to offer cover through a mobile app to drivers who want to borrow a friend or relative's car for a few hours or share driving when it launched in October 2015.

It has now sold over 130,000 hours of car insurance through its Cuvva Sharing product to drivers who want to borrow a car for as little as an hour.

The company has raised £2 million in fundin g since it was started two years ago and recently completed a £1.5 million funding round, led by venture capital investors LocalGlobe.

Tekton Ventures, Techstars Ventures, Seedcamp, Nick Hungerford (the founder of online investment management service Nutmeg) and Ian Hogarth (founder of SongKick) are also among the company's backers.

This fully-comprehensive subscription insures the vehicle when it's parked up at your home and not in use.

However, when the owner decides they need to drive somewhere, they then have to pay from £1.20 for every hour they're behind the wheel using a top-up service on the Cuvva app.

Unlike it's existing pay-as-you-go insurance service based on a driver being able to get behind the wheel of any car, the subscription cover is for one vehicle only.

If two people share a car they would need two subscriptions in order to drive it.

As with conventional insurance, users will earn a no claims discount at the end of a 12-month subscription, which is then fully transferable.

The monthly subscription can be cancelled at any time at no cost, though drivers run the risk of a fine from the DVLA if the vehicle isn't insured by another provider or declared off the road - or SORN - at the end of the 28-day subscription period.

How much could you save?

According to Confused.com, the average insurance premium by the end of 2016 rose to £767, though it is significantly higher for the youngest of motorists - £2,122 a year on average for 17 year olds.

Cuvva says the new subscription-based policy could save infrequent drivers up to 70 per cent on an annual premium - the equivalent of between £500 and £1,500 a year.

Founder, Freddy Macnamara, says he came up with the idea for pay-as-you-go insurance after using Uber and Deliveroo

Founder, Freddy Macnamara, initially came up with the idea of paying for car insurance by the hour while discussing lending his car to a friend.

'It was ridiculous that I couldn't borrow a car for an hour, because of the difficulty of getting short-term cover,' he said.

'I could order an Uber or a Deliveroo to my house, but I couldn't buy insurance for a short period quickly.

'We realised that we could use the same mechanism to save infrequent drivers a huge amount of money.

'Technology has changed so many industries and given consumers cheaper, more convenient alternatives. Yet car insurance continues to be opaque and inflexible, costing some people a lot more than it should.

'Whether it is borrowing a car from a friend for a short period of time, or owning a car that you don't drive much, many people get an unfair deal when it comes to car insurance.'

Ophelia Brown, general partner at venture capital investor LocalGlobe, said: 'Pay-as-you-go insurance is a long overdue product in the UK, where increasingly the trend is for drivers to use their cars less and less.

'It's crazy that people's premiums haven't and can't change to reflect that. Cuvva understands that, just as consumers expect price transparency and flexibility with all other financial services, they should also get that with their insurance.'