Pay As You Drive Insurance Gaining Popularity

Insurance programs that encourage less and safer driving are gaining momentum across the country.

Conserving money is a top priority for many consumers these days. In response, insurance companies in recent years have rolled out programs offering cheaper premiums for less time behind the wheel.

Pay-as-you-drive (PAYD) insurance programs, which base premiums on mileage, driving habits or both, are available from numerous insurance companies in more than half the country, and they’re gaining popularity. The shift could eventually result in lower carbon emissions, reduced oil consumption, less congestion and, because of the potentially lower cost, more insured drivers. It could also mean fewer accidents—which might produce less work for collision repairers.

A Brookings Institution report from 2008 estimated that the U.S. could save at least $34 billion annually if all motorists used a PAYD plan. The report attributes the accident reduction to an 8 percent drop in driving. U.S. motorists currently drive 3 trillion miles per year.

Most PAYD programs require customers to install a wireless device that plugs into their vehicle’s onboard computer through a diagnostic port. That device monitors mileage and driving habits and can be removed easily by a repairer without affecting the data.

The only thing collision shops would need to know about the device is that if they need to use the port the device is plugged into to do diagnostic work, they can simply remove the device to do the diagnostics and then plug the device back in when they’re done.

Progressive was one of the earliest companies to offer this system. Its Snapshot program tracks the number of miles driven, time of day they were driven and the frequency of sudden stops. People who drive less, go out at safer times of day and make fewer sudden stops could get a discount.

But, as the need for green—in the form of cash and environmental conservation—grows, the practice is becoming more accepted.