Norwich Union says its new programme will offer lower insurance premiums to drivers between the ages of 18 and 21.
Pay-as-you-drive uses technology to calculate premiums based on when and how often motorists drive their car. The 'black box' style device is fitted into the car and uses satellite technology to record the journeys of the car. This information is then transmitted to Norwich Union via a mobile phone network.
Once the information has been received premiums will be calculated in a similar way to mobile phone tariffs. Drivers will be able to control their premiums to more affordable levels by driving mainly during 'off peak' times between the hours of 6am and 11pm rather than driving during 'peak' times between 11pm and 6am.
Norwich Union says the tariffs have been calculated based on accident statistics for the 18-21 age group, which show these motorists are at much greater risk of being killed or seriously injured in car accidents between the hours of 11pm and 6am.
Users will pay a monthly fee for cover against fire and theft, and also a personalised rate for off-peak travel, which starts at 6p a mile.
Travel during peak times costs a flat rate of £1 per mile.
The first 100 off-peak miles each month under the policy, known officially as pay-as-you-drive will be free, Norwich Union said.
The insurer calculates that younger drivers could save up to 30% a year off the cost of their premiums.