Pay as you drive insurance offers savings for infrequent motorist

What’s commonly called “pay as you drive” (PAYD) insurance offers you the chance to save on your auto insurance, but you might not like the creepout factor involved with this controversial coverage.

Years ago, I talked about an experiment from Progressive where the insurance carrier was using a spybot in your car to track every mile you drove, how fast you drove and the time of day, among other factors. That info allowed them to assess how much of a danger you would pose to them as a driver. They could then give you a variable insurance rate according to your individual driving habits and uses.

Progressive’s version of PAYD is now called the Snapshot Discount program. According to the Progressive website, “The Snapshot device records vehicle speed and time of day, and when the device is connected and disconnected from the vehicle. It also records the Vehicle Identification Number upon installation. Other information, such as miles driven and rates of acceleration and braking, is derived from the speed and time information recorded by the device.”

Progressive’s Snapshot Discount is now offered in 25 states. Some 25% of Progressive’s customer base takes advantage of it for lower insurance rates. Meanwhile, The Dallas Morning News reports that there are about 10 other companies offering PAYD insurance as well.

I love the concept of PAYD. But a lot of people are creeped out by the Big Brother aspect of something like Snapshot Discount. For those people, there’s a company called MileMeter.com that has a different way of doing it. MileMeter.com trusts you to give them updates on your mileage every 6 months and then they charge you based on how much you drive. The less you drive, the less you pay. The more you drive, the more you pay. (Editor’s note: At this time, MileMeter.com is only available to motorists in Texas.)

So there are really two models here, the one typified by Progressive and the other from the MileMeter.com folks.

Motorists who log mega-miles may cry foul about the idea of PAYD, but here’s how I see it: You already pay more for gas and maintenance, based on how much more you use your car versus a more casual use motorist. So extending that idea to insurance seems to make perfect sense.

Whether or not you like it, PAYD will become more common over time.