Icon CheckLast updated: June 28, 2022

PAYD and Usage-Based Car Insurance

One of the fundamental challenges of pricing car insurance has been that insurance companies can’t be in the car with you to see how you drive and how many risks you take behind the wheel. Instead, they have to look at pieces of information — from your age to your credit history — to help them predict how risky of a driver you are and how many claims you’ll file. But the growing popularity of usage-based insurance is changing all of that.

“Usage-based” insurance refers to programs that adjust your prices based on how you actually drive. They often require you to install a device in your car to send driving information to your insurer on a day-to-day basis. If your driving data is better than average, you may be in line for a discount.

How usage-based programs work differs from insurer to insurer. They use different types of equipment, track different driving habits, and are available in different states.

There are two main categories of usage-based insurance: those that track mileage only and those that track overall performance.


When usage-based insurance first started, there was only one form available: pay-as-you-drive (PAYD) insurance. With these programs, which are still around today, the only usage information that gets tracked is mileage.


More recently, insurers have been introducing programs that track your overall driving habits behind the wheel, beyond how far your drive. This includes your mileage but may also include things like how hard you brake and how hard you turn.

How Usage-Based Insurance Works

If you want your auto insurance prices to be based on the way you drive, you’ll give your insurer information through either odometer readings or a device that plugs into your car.

PAYD programs are usually pretty straightforward: fewer miles equals better prices. To see whether you get a discount for putting in fewer miles, your insurer will check your odometer or driving data at renewal periods of 6 months or 1 year. Other programs might have an earlier check-in period 30 days after you enroll in the program.

For programs that are based on your overall driving behavior and performance, there’s a bit more to explain. After you enroll in the program, you get a device to install into your car. Typically, you plug this into your car’s diagnostic port, which is usually just next to your steering wheel. These devices use a technology called telematics to translate how you drive on the road into data that gets sent to your insurer.

Many insurers post your driving data online for you to view in real-time. That way, you can adapt the way you drive for safety on the roads and get discounts on coverage. These are the behaviors that are tracked in the typical usage-based program:

  • How you turn
  • How hard you brake
  • How fast you accelerate
  • The time of day/night you drive

After enrolling in a program, you’ll often:

  • Get an initial enrollment discount.
  • Get a telematics device in the mail and install the device in your car.
  • Undergo a testing period where your driving behavior is monitored, typically over a period of 6 months to a year.
  • Get an adjusted discount, typically at renewal time, based on your driving during that testing period.

Growing availability

Today, most major insurers have some sort of usage-based program. The following table shows which do and how many states they’re available in.

Company Program name Availability
Progressive Snapshot 45 states
Esurance DriveSense 19 states
Travelers IntelliDrive 8 states
Allstate Drivewise 30 states
The Hartford TrueLane 12 states
National General Low-mileage discount 35 states

These programs have come a far way since insurers began offering them.

One of the first companies to have PAYD insurance was Progressive. According to the Insurance Information Institute, the company introduced the program in the mid-1990s, tracking mileage through annual odometer readings and rewarding drivers who drove less with better prices.

In the early 2000s, Progressive and General Motors Assurance Company (GMAC) improved PAYD offerings by taking them digital. During this period, these two insurers began to use GPS technology and cellular systems for PAYD programs, allowing for digital transmission of the data, according to the National Association of Insurance Commissioners.

Progressive’s PAYD data showed just how much mileage can affect your chances of filing a claim. According to a Brookings Institute study that included an analysis of Progressive’s data, drivers who drove around 25,000 miles a year were about 66% more likely to file a collision claim in a year than customers who drove around 6,000 miles a year.

Over time, these programs increased in number and diversified in type. Progressive’s program eventually was renamed to “Snapshot,” and it transformed into one of the earliest programs to expand tracking to other behaviors beyond mileage. Several programs currently use this method, monitoring how you use your car to determine your price.

Now, you’d need two hands (and probably more) to count the number of insurers with a usage-based insurance program. Nearly all of the nation’s top 10 personal auto insurers have one, and every state has at least one usage-based insurance option.

Did You Know?

Growth of usage-based insurance

Usage-based programs used to be offered by only a few companies in a handful of states. Today, drivers in every state have access to at least one usage-based insurance option from a major insurance company.