Insurers use this information to help them calculate your premium. The less you drive, the cheaper your insurance, so while you always need to give a genuine estimate to avoid committing fraud, it makes it doubly important not to overestimate as you'll also end up overpaying.
The best method is to look at how much you've driven in the past using accurate data, and if your driving habits haven't changed, put the same figures down. If they have, change the figure accordingly. The easiest ways to find out your history is by looking back at old MOT certificates or service documents where your mileage would have been recorded – just compare one year with the next for how far you've driven.