(February 10, 2011) SANTA MONICA, Calif. — The rise of telematics technology in vehicles has led many auto insurance companies to create pay-as-you-drive policies that are based on the actual miles driven by the insured. Edmunds.com explores how these policies work together with their pros and cons in its recently published article "Pay-As-You-Drive Insurance Goes Into High Gear."

Pay-as-you-drive policies can save money for consumers who drive less, and therefore risk fewer accidents, provided they are willing to allow the insurance company to monitor their mileage — and even driving behavior in some cases — with telematics devices such as OnStar.

"This type of insurance will most benefit a safe driver who falls into a high-risk category," said Carroll Lachnit, features editor at Edmunds.com. "For example, teenagers who would normally face higher rates because of their perceived risk could save money by proving they are careful behind the wheel."

Drivers can expect to see an influx of pay-as-you-drive programs as more states approve them. California recently approved such plans for State Farm and AAA after finalizing regulations. More than 100,000 drivers have signed up for the Snapshot policy with Progressive Insurance, which is currently available in 27 states. Allstate offers the Drive Wise policy in Illinois and plans to expand it to more states in 2011.

Policies based driving behavior, such as the Progressive and Allstate programs, determine the risk level of the driver based on mileage, breaking and acceleration patterns, and when during the day or night a car is driven — all of which can be transmitted through telematics devices.

Privacy advocates warn that this type of program may eventually lead to situations where insurance companies can access too much personal information about drivers, such as using GPS to determine which locations they are driving to. Insurance companies stress that the information they gather from telematics devices is limited to when, how safely and how far they drive, and does not include GPS location or driving speed.

Read the full article "Pay-As-You-Drive Insurance Goes Into High Gear"