With the rollout of its Drive Safe and Save offering in Texas April 4, State Farm became the latest insurer to expand pay-as-you-drive car insurance.
State Farm's voluntary program rewards policyholders with discounts of 1 percent to 30 percent if they drive relatively few miles. For example, the owner of a vehicle driven 11,000 miles annually would receive a 7 percent discount on car insurance rates. To participate, a policyholder must have an active OnStar account with OnStar vehicle diagnostics to report odometer readings to the insurer.
State Farm began a pilot mileage-based program for OnStar customers in Ohio in August 2009 and a full launch of a pay-as-you-drive program in California last year.
Other insurance companies introduced similar programs in the last few years and are expanding them. Progressive recently announced a nationwide expansion of its pay-as-you-drive discount program called Snapshot Discount. Allstate launched a mileage-based program in Illinois last year and said it planned to expand it to other states in the second quarter of this year.
GMAC, American Family Insurance and the Automobile Club of Southern California have also introduced mileage-based discount programs.
For the reporting of odometer readings, some insurers partner with OnStar, and others supply customers with a wireless telematics device that is plugged into the vehicle's onboard computer through a diagnostic port, which is under the dash on most car models.