Satnav manufacturer TomTom has joined forces with insurance broker Motaquote to launch a new car insurance product that rewards safe drivers with lower costs.

Anyone that signs up to the Fair Play Insurance service will be issued a TomTom Pro 3100 navigation device that will alert drivers when they perform activities that could potentially result in an accident such as late breaking and sharp cornering.

The policy also requires a Link tracking unit, which monitors the driving habits and displays them on the driver's dashboard and in regular emails, to be fitted to the device.

Initially a driver will pay lower premiums but if their driving habits are reckless they will find they are pushing their premium up themselves.

"We've dispensed with generalisations and said to our customers, if you believe you're a good driver, we'll believe you and we'll even give you the benefit up front," said Nigel Lombard, Managing Director of Fair Pay Insurance.

"This is unlike some other telematics-based schemes where you may have to prove your ability over a number of months. So if you think of your insurance as your car's MPG – the better you drive, the longer your fuel will last. It's the same with Fair Pay Insurance, good drivers get more for their money and in that sense they will pay ultimately less."

Drivers that take out the policy will be required to pay for the TomTom device and tracking kit themselves. Furthermore, the device offers benefit from TomTom's Live services that include accurate traffic information that is updated every two minutes.

"We offer a unique combination of navigation, traffic information and telematics which opens up great opportunities for insurance companies to promote greener, safer driving and create a ground breaking portfolio of new insurance products," said Thomas Schmidt, managing director TomTom Business Solutions.

The news comes amid reports that the AA is set to launch a new insurance policy that also uses satnav technology to track driver performance. According to a BBC report, the system involves the installation of a small black box into the driver's car which monitors speed, braking severity, cornering and the types of roads used during certain times of day.

This information is transmitted remotely to the insurers, and can also be accessed by users via a website that gives information on overall performance, warning them if they are likely to be moved to a higher premium.

Other insurance firms, such as Direct Line, Co-operative Insurance and Coverbox are piloting similar schemes.

“We can see a point where our claims teams can be advised in real time of an accident and its location and arrange for emergency and recovery vehicles to attend the scene much more quickly,” said Grant Mitchell, head of motor insurance at Co-op Insurance last year.

Sophie Curtis contributed to this report