Consumer groups and some economists have demanded this type of coverage (UBI) for years

http://www.dailyfinance.com/story/insurance/can-pay-as-you-go-auto-insurance-save-you-money/19898737/?icid=sphere_copyright

People should only pay for the insurance coverage that they actually use. In other words, drivers who drive less would pay less for insurance.

Consumer groups and some economists have demanded this type of coverage for years, and their lobbying has paid off. Last month, Progressive Insurance began advertising its Snap Shot Discount pay-as-you-go product nationally. Its available in 32 states.. State Farm and Allstate also offer similar deals in a handful of states.

Texas spearheaded the movement: It was the first state to allow such coverage back in 2001, while California -- a state that often begins auto trends -- only began permitting it in December.

Big Discounts for More Data

The industry argues that these policies can save consumers a bundle. Progressive estimates potential savings of $150 a year, for example. "Pay-as-you-go insurance can be an excellent choice for people who drive very few miles during the week," Chris Kissell, managing editor of Insurance.com, writes in an email.

But experts caution that pay-per-mile policies aren't right for everyone. For one thing, to determine eligibility, insurers typically install a device that tracks customers' driving habits for some time -- usually about six months, Kissell says. "Some drivers may not be comfortable with this and may see it as an invasion of privacy," he writes.

Some of the programs also have strict rules about when customers can drive and may disqualify customers from getting the discount if the tracking device shows that they often drive late at night, he adds.