Cut costs with pay-as-you-drive coverage

"We've tried to create this program as a way for people to save on their auto insurance and to be very respectful of individual private data at the same time," he says.

While the OnStar program does have a GPS tracking device, O'Donnell says that drivers are only sharing their location information with OnStar as part of its emergency assistance program.

"Customers have to be with OnStar first before they can opt in to our low-mileage discount program," O'Donnell says. At that point, the customer allows OnStar to share relevant information with GMAC insurance.

Regardless of the insurance company, pay-as-you-drive programs are voluntary, and just as customers opt in to them, they also can opt out by switching to traditional auto policies.

5. Exceeding the mileage limit could trigger a surcharge. A low mileage insurance program is supposed to save you money, but unwitting drivers actually could receive surcharges if they go over the low-mile limit. For example, under Progressive's MyRate program, rates could go up 9 percent if the driver goes over the limit.

Despite the possibility of an increase, Hutchinson insists there are no surprises.

Policyholders can look at their driving data online, view the number of miles they've driven during the policy term and determine if that number qualifies them for a low-mileage discount at their next renewal, he says.

With up-to-date access to discount eligibility information, drivers have a chance to adjust their habits before their policy renews. If consumers’ mileage is too high, they shouldn't be surprised if their discount disappears in the next policy term period.

"At the end of the day, what insurance companies want to do is to charge people enough to cover the risk on the policy," says Belden of "They can more accurately cover this risk if real-life behavior is measured."


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