Progressive to Offer “Pay As You Drive” Insurance


While other insurance companies belittle those who can’t or don’t drive, another — Progressive — is living up to its name by being the first major US insurer to offer a "Pay As You Drive" policy, allowing customers who drive less to pay less for coverage.

As explained in a New York Times "Freakonomics" article on the negative externalities of driving, Progressive will offer "MyRate" PAYD plans in six states.

Drivers who sign up for MyRate will install a small wireless device in
their cars that transmits to Progressive not just how many miles they
drive but also when those miles are driven and, to some extent, how they
are driven: the device measures the car’s speed every second, from
which Progressive can derive acceleration and braking behavior. Which
means that Progressive will not only be able to charge drivers for the
actual miles they consume but will also better assess the true risk of
each driver.

The Freakonomics guys believe that PAYD insurance may be the most practical and likely means to curtail driving in the US, where other methods, like congestion pricing and gasoline taxes, are politically unpopular — even though congestion, carbon emissions and car crashes cost Americans more than $300 billion per year, according to studies cited in the article. 

Regardless of its societal benefits, as a private sector initiative PAYD is undoubtedly a risky move for the first company to try it.

But if Progressive’s PAYD insurance can induce some of its
high-mileage customers to drive less and especially to drive more
safely, resulting in smaller claims payouts for Progressive and fewer
negative externalities for everyone, then it could truly be a
win-win-win situation.

Except, perhaps, for Progressive’s rivals.

Photo: ASurroca/Flickr 

  • Larry Littlefield

    The article implies I’m not getting my proper savings for not driving to work, and driving few miles. Perhaps I’ll see if they’ll offer to charge less.

  • Brett

    Anyone know where you can find out more? Which six states? I couldn’t find anything about it on their site.

  • Batty

    At first I thought this was a great idea – and I still do.

    I fear though all companies doing the same thing in ten years so you have to be tracked in order to drive.

  • Batty

    One other thought – could this create a class system of drivers if adopted universally? For example wealthier drivers can afford to drive faster and more dangerously than poorer drivers.

    ACLU will have a field day.

  • Josh

    “One other thought – could this create a class system of drivers if adopted universally? For example wealthier drivers can afford to drive faster and more dangerously than poorer drivers.”

    Sounds like the same argument that was made to support the point that CP was elitist.

  • Spud Spudly

    I read about a car rental company that makes people sign a pledge to not drive over the speed limit and then uses GPS tracking to tell if they do. Then it charges an extra fee depending on how fast you go. So this kind of stuff is already out there, though I’ve never heard of an insurance company doing it.

    Anyone who signs up for this should be prepared to have their every mile tracked and the data used against them for myriad purposes, not just by their insurance company. Law enforcement, your wife’s divorce attorney, your employer’s payroll department etc. will be able to get their hands on this info. And if you get into an accident and make a claim the insurance company will use the data to deny your claim any way they can. It’s probably better to just pay for regular insurance, especially since you have to disclose your mileage to your insurance company anyway.

  • Spuds,

    Easy way to avoid all of the above: don’t drive.

    Walk to your illicit assignations. Use a bike as a getaway vehicle when you rob banks. Take transit to the job interview.

    See? Easy.

    But, hey, if you want to join the high-mileage risk pool, go for it. Because the more money Progressive (and other companies) get out of their high-mileage pool, the lower the rates for those of us who drive less.

  • If this is successful, and I think it will be, there will be an opting-in effect that is similar to those that opt-in and opt-out of health insurance (but here it’s a good thing). People that drive more and/or recklessly will choose not to participate in PAYD. Regular insurance will be increasingly burdened with the higher-risk end of the market, and premiums will likewise go up. Boo hoo. The genie is half-way out of the bottle, thank you Progressive for being to the first to implement in the US!

    As far as tracked driving goes, this is just something that people want to drive cheaply will have to accept. Mass transit (paid in cash) and biking will be the cheaper option for adulterers, mobsters, and those that simply do not like leaving digital trails. OR you pay more to be a higher risk untracked customer with traditional all-you-can-eat insurance, as long as that option remains available. This natural (though somewhat tardy!) market effect isn’t one that the NYS Assembly will be able to protect frequent drivers from.

  • Spud Spudly

    My insurance company already knows that I drive ~4500 miles per year because the state of New York notes the mileage annually every time I get the car inspected. So in New York at least the new Progressive program would really only be about tracking driver behavior, not mileage.

    But you’re right about the other stuff — the Times Square bomber used a bike and apparently got away scot-free. Too bad my golf clubs won’t fit on my bike.

  • drose

    My hunch is that New York State’s Department of Insurance does not allow Progressive to offer this policy in this state for quite some time.

    From the comments above, I’m guessing that the State Insurance Commissioner (still one of Spitzer’s AG staffers, for now) will deem this too intrusive for New York consumers to bear. Yet another reason to register out of state!

  • Not Offended Yet

    Another way to think of it is a surcharge on drivers who are behind the wheel alot.

    I don’t know the specific details of the plans in those 6 states but I doubt there will be significant incentive for those able to reduce mileage from 5,000/year to say, oh, 2,500/year.

    The incentive will be for drivers to reduce driving from 25-30k/year to 12k or less.

  • spike

    People who drive very rarely tend to have more accidents than those that drive a lot. You really notice this around NYC, where you have a large group that only drives out of the city on the big holidays or else a few times each summer to their summer houses upstate. These people tend to be poor drivers, changing lanes into other cars and so on.

    The worst drivers by far are the dopes on cell phones. They can be really scary.

  • Peter

    The six states are MD,KY,LA,IL,NJ. They will be the first this summer.

  • Allison

    Peter–that is 5 states. what is the 6th?

  • Larry Littlefield

    (My insurance company already knows that I drive ~4500 miles per year because the state of New York notes the mileage annually every time I get the car inspected. So in New York at least the new Progressive program would really only be about tracking driver behavior, not mileage.)

    That’s why I assumed I was being charged less as opposed to driving less. They also know I do not drive to work or drive the kids to school, and I had to report how every family member gets to those destinations and where they are to prove it.

    But perhaps the discount isn’t as much as it could be. Or perhaps it is about speeding, driving at 4 am, etc.

  • It’s about them having having reliable and up-to-date information about a number of things, including distance driven. The way it works now is a roughly figured reward for light driving; PAYD will cerate a direct, known disincentive for each (golfing?) car trip. Whatever people want to allege about the skills of infrequent drivers, for any given driver a percentage reduction in driving is going to reduce accident likelihood for the coverage period by that percentage (other things being equal) which would translate into significant savings as a same percentage discount. I’ll leave it to Progressive to come up with the algorithm, but the cost unnecessary trips is going to be more transparent to motorists after it’s in place (whether they opt-in or out).

  • Andy B from Jersey

    My insurance company in NJ also knows that I only drive about 5000 miles a year because I tell them! Every year when I renew my policy I must tell them how much I drive in a sworn statement. I also must tell them if I use it to drive to school/work (I ride my bike instead) and that I use it only for pleasure. If I were to lie to them and they found out they could easily file suit against me. It’s just not worth the risk to lie.

    There is no reason for “Corporate Big Brother” to install a tracking device. If they do then dump them! There are plenty of other insurance companies out there.

    And if you choices for insurance are limited because you have a bad record, then maybe you shouldn’t be driving at all!

  • “And if your choices for insurance are limited because you have a bad record, then maybe you shouldn’t be driving at all!”

    This is just a choice that will be offered by some insurance companies and accepted by people that drive less frequently and more conservatively. It’s not that they’ll have no other choices, but that they’ll have better things to spend money on than a fading dream of automotive freedom. There is no cause for alarm. If you don’t like it, then maybe you should keep trying your lot with the unmonitored risk group… at all!

  • Spud Spudly

    I have to file the same information about how I use my car with GEICO, and they can verify the mileage with state inspection records. As someone who’s been driving for well over 20 years and has never received a moving violation, has never been at fault in an accident, has never injured anyone, has never had even one point on his license, who has taken a defensive driving course in the last three years, who doesn’t use his car for commuting of any kind and who has no drivers under 25 in his household I would be a prime candidate to encourage the use of driver behavior tracking to reduce my insurance premium. But the whole Big Brother aspect turns me off. Besides, I already get every safe driver discount GEICO has to offer, so how much more would they lower my premium if I agreed to be tracked everywhere I went?

  • “how much more would they lower my premium if I agreed to be tracked everywhere I went? ”

    We shall find out this summer, Spud. Until then I don’t understand why the self-proclaimed safest drivers the world has ever seen (here and in the NYT comments) are all so opposed to PAYD. If the current system is so great, the new one will show no advantage and be quickly abandoned.

  • Spud Spudly

    I’m not opposed to it for other drivers who volunteer for it. As for myself, I stated already why I wouldn’t want it.

  • Chris H

    I could be wrong but it seems that people are misunderstanding the type of tracking that the device does. AFAICT from the article, the device tracks how far, when and how fast but not where.

    Secondly it would be interesting to see how the rate structure works. Other companies provide a discount for low millage drivers. I wonder if this is priced purely on the mile and therefore makes insurance a commodity instead.

  • Freakos say: “Drivers who sign up for MyRate will install a small wireless device in their cars that transmits to Progressive not just how many miles they drive but also when those miles are driven and, to some extent, how they are driven: the device measures the car’s speed every second, from which Progressive can derive acceleration and braking behavior.”

    The only way a self-contained device could measure all that is with a GPS. An accelerometer could extrapolate velocity and distance by acceleration over time, but that’s more complicated and error prone. Since GPS can do all that pretty cheaply now, in a standard package, I’d be surprised if they used anything else. Also, I could swear that in reading about this yesterday something said they would factor in exactly where you drove, if it was on specific roadways that have proven to be crash-prone. Now I can’t find that text that I may have imagined. But my money is on a GPS system that the company will claim is only going to be used to get the risk data. Ideally they would state that the exact location data is permanently destroyed after it has been factored into the rate calculation. (And you’ll know if that’s true the first time a divorce lawyer issues a subpoena. If they are smart they’ll avoid that hassle and put the effort into data destruction.)

  • Charles

    Doc – if the device plugs into the OBD port it can get the speed the car is going. don’t need a gps. they do that now with tripsence. what are the states?

  • Brad Aaron

    A Progressive rep told us they can’t announce the states yet as they are still “working through the regulatory processes.”

  • Spud Spudly

    Maybe one of the reasons people with good driving records would be opposed (and it’s reasonable to assume that people who read the Times and Streetsblog just might fall into that category) is because the cost-benefit ratio just isn’t all that great for them. I pay $950 a year in Manhattan for full insurance minus glass coverage. Seriously, how much less could I pay? Even a 25% discount on collision, medical and liability (I doubt they’d offer the discount on comprehensive, glass, etc.) wouldn’t be enough to motivate me to install a tracking device, whether it tracks my exact location or not.

    People paying higher rates because of crappy driving records are the target group here as they have the most to gain by submitting to one of these devices. People who already pay low rates I think would pass (generally speaking of course).

    And I don’t see how they could not track your location and still gain the data they’re seeking. Because if they want to know if I’m speeding then they need to know what road I’m on, right? And they’re not disposing of that info so quickly — the first subpoena that arrives and your info is out the door special delivery. Jeez, I already have to leave my cell phone and EZ Pass at home!

  • Charles, thanks for the correction!
    “The TripSense device connects to a car’s OnBoard Diagnostic (OBD-II) port. (All automobiles built after 1996 have an OBD-II.) The device records information about the duration of a trip, the mileage driven, the rate of accelerations and deceleration, and speed. There is no GPS in the TripSensor device. No location information is collected.”

    Silly me, I’ve not owned a car built after 1996 and didn’t know they’d finally standardized basic diagnostics. So, the privacy discussion is mostly beside the point.

    Spud, you can’t determine your “cost-benefit ratio” until this thing is priced. I don’t see much point in speculating further on its target market, or specifically, putting down the group of people that might be interested in paying less insurance to drive less. If you’re happy with your “low” rates, there’s nothing for you to do but ignore this newfangled system and keep paying them. Since you’re so confident about the crappiness of the drivers it will attract, you can’t be worried about it bleeding off cautious or infrequent drivers from your own risk pool and raising your rates (as I expect to happen). My interest in this is only as a way to wean more of the general public off of driving, insured mile by insured mile, not what any particular person will submit to in insuring himself to cover automobile crashes.

  • dr2chase

    Years ago, living in California, I reported that I was only driving one of my cars about 1000 miles per year, and got a discount, but it was nowhere near proportional to the number of miles driven. I’m interested in seeing how this works out; partial commuting by bicycle already saves me on gas and medical (drug) expenses, adding insurance to the mix would be a nice bonus.

    The assumed correlation of very low mileage drivers with higher accident rates might be broken if this system were put into place. Currently, very young and very old drivers are low mileage, and others live places where they take mass transit or walk, and if they drive at all, learn different (urban) driving skills. If experienced, competent drivers simply drive less, they will retain most of their skills, and their reaction time and vision will be undiminished.

  • Ian Turner

    According to this article, TripSense only gives you a maximum discount of 20%.

  • Yeah that is the existing system. The new “MyRate” one should have a new rate structure even if it uses the same tech.

  • Deena Belden

    Alert to everyone, I use to work at Progressive this device is a set up, intially your policy will recieve discounts for driving less, however in the future your rate may be affected the more you drive, example during one 6 month term, you drive 6,000 miles, during the next term you drive 7,000 miles you will more than likely see a rate increased that will be blamed on rate revision, miles driven etc.

  • The Wikipedia article claims “Collected data is reviewed by the policyholder before it is shared with the insurance company. The policy holder is told how much of a discount, if any, he or she qualifies for based on their data. Policy holders can then choose to share the data with the insurance company and earn the discount, or withhold the data and pay the normal premium.” If true, that certainly would make it more palatable.

  • charles

    does anyone have the new myrate device that trans mits data via cell chip? who makes it?

  • AC

    I thought we already had a device that tells how many miles you drive a year, it’s called an odometer.

    This is a device designed to allow your insurance company to make more money, not save you any.

  • Everyone is aware of the odometer, as well as the fact that it can not remotely report to insurance companies, and therefore, can not make timely mileage accounting cost effective or convenient. The odometer also can not give any indication of agressive driving. It is not sufficient for a program like MyRate, which is certainly designed to allow Progressive to make more money. Isn’t that the aim of any company program? But that doesn’t mean that customers won’t save money; if no one saw any savings, no one would renew and this particular money-making scheme would cease to exist.

  • Susan

    For those of us who drive less and are safe drivers this is a wonderful concept. I usually total somewhere between 6,000 & 8,000 a year(I live in a rural area)and this is mostly to my full time job. My problem is high car insurance rates because I was forced to file bankruptcy 2 yrs ago. I am now single with two children a mortgage and a 2nd mortgage. It took everything I made to pay these and my Natural gas bill and other household bills and things got behind beyond repair. But that is just ranting on my part. Anyway, I don’t know how many are aware of this but the insurance companies raise premiums when a person has bad credit. The worst thing about this is the reasoning. The insurance ‘tycoons’ state that people with bad credit are more likely to have accidents. This is a total crock. I’ve been driving for 23 yrs and I’ve had 1 accident and 1 speeding ticket(34mph in 25mph zone). The accident didn’t involve another vehicle and no bodily injury and both were many many many years ago. My insurance raised more right before the bankruptcy than it did when I had the accident. From 800.00 yr to almost 1100.00 yr. So for those of us who drive less and are safe this program would be a God send. Those of you who don’t want this kind of insurance, don’t buy it, no one is forcing you. This isn’t mandatory. I have nothing to hide and my poor car probably thinks its speedometer is only registered for 65mph.(highway speed in my neck of the woods) It would really help out the people who pay high premiums for wrong reasons.

  • Tom

    You would have to be a complete moron to allow an insurance company to attach a device to your vehicle and let them monitor you. This will surely come back to haunt anyone who uses it because they will know your every move and figure out some way to just charge you more for insurance. I find it disgusting that the stupidity of this country has gone this far that people will actually pay an insurance company to put lojack on their vehicle. They will figure out a way to charge you more, that is guaranteed. All that for maybe saving 25% if you are lucky! No way that is worth it. That would be like $100 for me and it would not be worth it to me. I respect my privacy way too much as a citizen of the US to allow this kind of thing to happen to me. Just more liberal BS that will come back to haunt people after they have this done.

  • Ian Turner


    As Doc Barnett points out above, the Pay As You Drive system does not track your location.




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