With the rising cost of car insurance and the arrival of online companies increasing competition, some insurers are investigating a fairer way to set premium pricing.

Norwich Union launched a nationwide pilot scheme of 'Pay As You Drive' insurance last year to collect data to create different levels of cover for drivers of different risk profiles.

Each one of the 5000 volunteers carries a black box in their car that gathers information on where and when the car is being used to help the insurance company decide how to charge the customer by the mile.

But other insurers are not convinced the scheme will work.

Mike Pickard, head of risk and underwriting at esure.com said: "People expect their premium to reflect their risk - particularly if they are safer drivers - but everyone still needs to be part of a large pool for insurance to work.

"If insurers move to charging by the mile, the road and the time of travel it starts to chip away at that principle.

"It is a question of balance and we believe we can strike the right balance without black boxes."

The average comprehensive insurance cost has risen from £408 in 1994 to £762 in 2006, according to figures from the AA.