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 Money-Insurance.com 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.