Nancy Singer, a spokeswoman for the Federal Highway Administration in Washington, D.C., says the government's goal with the grants is to allow states to explore innovative transportation ideas.
"We're just trying to give the states an opportunity to experiment with it and see how effective it is," Singer says.
MileMeter allows customers to pay only for the miles they use. It offers such policies only in Texas. Drivers purchase between 1,000 and 6,000 miles of insurance, and are covered for six months.
When drivers renew their policies, they pay for any extra miles used. Unused miles roll over to the next six-month period. Drivers typically save 25% to 75% per year on insurance.
MileMeter requires customers to photograph their odometer and driver's license, and submit the photos when they apply for or renew their insurance. There's no mileage-tracking device, which alleviates concerns about privacy and tracking drivers.
Hutchinson says some states allow monitoring for mileage but not for vehicle location.
Starting in February, California customers have been able to enroll in pay-as-you drive auto insurance programs with State Farm and the Automobile Club of Southern California. With both programs, drivers can self-report their mileage.
State Farm customers can also have their mileage reported via OnStar, and Auto Club members can plug in a small "telematics" device that will record the number of miles they drive. Those who use the verified mileage methods have slightly lower rates than those who self-report their mileage.
For many customers and state regulators, "the single biggest concern is locational privacy," Hutchinson says.
This article was reported by Susan Ladika for Insurance.com.
