Pay As Your Drive Car Insurance

For years, car drivers paid less for auto insurance if they reported low mileage. Now, some insurance companies are using high-tech devices to track customers’ habits, and offering deep insurance discounts to those who not only drive less, but also cautiously.

Drivers who participate in these plans have devices installed in their cars that, depending on the technology used, can track the number of miles driven, the speed at which cars are driven and even how often and how hard the brakes are used. By allowing their habits behind the wheel to be monitored, drivers get lower insurance rates or they may pay higher premiums if the device tracks excessive speed, mileage and braking. This current technology does not use GPS (global positioning system) so the driver’s location is not tracked.

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Usage-based insurance pricing would mean an estimated two-thirds of households would pay less in premiums than they do now. Some analysts and insurers believe that after a slow start, usage-based insurance could take off since higher gas prices are forcing consumers to drive less anyway.

Proponents of these plans say they also have the potential to help ease traffic tie-ups and reduce carbon emissions by rewarding customers for driving less. Fewer miles on the road also means fewer accidents — and fewer claims for insurers. With pay-as-you-drive insurance, drivers in the U.S. would reduce their mileage by about 8%, with $51.5 billion in social benefits mostly from reduced congestion and accidents