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Norwich Union has pulled its 'pay as you drive' policy from the market after failing to attract enough customers to the scheme.

The policy offered low-mileage drivers a discount if they kept to an agreed limit, and policyholders were billed every month. A device in the car that used GPS technology monitored how many miles the car was doing.

Aviva-owned Norwich Union introduced the policy in 2004 after a pilot and said take-up was enthusiastic.

The scheme seemed to be a success and led to other innovative policies, such as Drive Time from More Than, which gave discounts to young people who avoided driving at night.

Norwich Union said the problem was the scheme did not achieve a 'critical mass of customers' and although Pay As you Drive had a loyal customer base, the insurer has decided to 'pause' the scheme.

Norwich Union spokesperson Erik Nelson said customers would be written to and the company is beginning a process to transfer policyholders to other Norwich Union products.

"Because we know their driving habits, they will not be at a disadvantage," Mr Nelson said.

The insurer dropped the policy because in-car technology has not evolved as fast as Norwich Union was anticipating, the company said.

Mr Nelson said Norwich Union may bring the policy back "once the market catches up".