LONDON (Reuters) - British motor insurer Admiral <ADML.L> has had to abandon plans to use data taken from Facebook <FB.O> to price insurance premiums for first-time drivers following discussions with the social media firm, an Admiral spokeswoman said on Wednesday.

British newspapers said earlier on Wednesday the insurer would analyze Facebook accounts of new drivers for personality traits which show a cautious nature, such as writing lists and arranging a set time and place to meet friends.

Insurers say examining social media could improve the pricing of policies, but critics say this could erode customers' privacy.

Admiral's firstcarquote app was designed to allow new drivers to share social media data in order to get a discounted quote.

"Following discussions with Facebook, the product is launching with reduced functionality, allowing first time drivers to log-in using Facebook and share some information to secure a faster, simpler and discounted quote," the spokeswoman said by email.

"Admiral does not have access to customers’ Facebook data and does not hold social media data to set prices for its customers."

Facebook bans the use of its data on apps to make decisions about "eligibility", such as how much interest to charge on a loan.

"Protecting the privacy of the people on Facebook is of utmost importance to us," a Facebook spokesman said by email.

"We have made sure anyone using this app is protected by our guidelines and that no Facebook user data is used to assess their eligibility. Facebook accounts will only be used for log-in and verification purposes."

Steep insurance premiums for young drivers in the UK have encouraged the use of technology to cut prices, such as telematics - black boxes installed in cars to monitor safe driving.

Some UK insurers also monitor public social media data to help them identify fraudulent claims, industry sources say.

(Reporting by Carolyn Cohn; Editing by Elaine Hardcastle)