Image: Frustrated woman driving car © Jose Luis Pelaez Inc, Blend Images, Getty Images

As job growth stalls and household budgets shrink, more drivers are warming up to cost-cutting pay-as-you-go car insurance programs.

Pay-as-you-go plans peg your insurance premiums to the number of miles you drive. Drivers also receive discounts for avoiding violations and accidents, and for limiting time on the road during peak-traffic hours and late at night.

If you meet all pay-as-you-go requirements, it's possible to save up to 30% on car insurance premiums.

A majority of drivers who took an MSN online poll said they would at least consider driving less if it meant they could save money on car insurance. The poll results were as follows:

Would you be willing to drive less to cut your insurance rate?

  • Yes, 24%.
  • It depends on how much money I could save, 35%.
  • No, 21%.
  • I can't drive less than I already do, 20%.

The unscientific poll appeared on MSN Money's homepage Sept. 1-6 and drew 8,702 responses.

Insurers respond to demand

Two of the nation's biggest insurers are now responding to this growing demand for pay-as-you-go coverage.

State Farm, the country's largest insurer, plans to introduce a telematics-based effort dubbed In-Drive to drivers in Illinois this month. Additional states are slated to receive In-Drive in 2012.

Allstate, the nation's third-largest insurer, recently expanded its Drive Wise pay-as-you-go program to Ohio and Arizona after an earlier rollout in Illinois.

It's no coincidence that pay-as-you-go insurance is on the upswing at a time when the economy is in a downward spiral, said Robert Passmore, a spokesman for the Property Casualty Insurers Association of America.

"A lot of companies are offering it, and a lot of people are driving less and looking for ways to save money," he says.

More control, lower premiums

If you join a telematics-based program, you'll typically be asked to install a device in your car's diagnostic port (located below the steering column) that records information such as:

  • How many miles you drive.
  • How often you brake hard.
  • How smoothly you navigate turns.

Initially, privacy advocates raised concerns about these devices and their ability to snoop on drivers. But the success of programs such as Progressive's Snapshot and a GMAC Insurance program based on OnStar technology apparently has convinced more insurers that pay-as-you-go insurance is the wave of the future.