Allstate’s program is part of a new breed of insurance programs that use vehicle telematics to create pay-as-you-go insurance policies. They include Progressive Snapshot, State Farm Drive Safe & Save and Nationwide SmartRide. On average, consumers can save anywhere between 5% and 50% on insurance using pay-as-you-go insurance.

The ideas behind these programs are tantalizingly simple: What if you could only pay for the insurance you use? What if an insurance company could reduce your premiums by verifying your good driving habits in real time?

“Telematics has disrupted the automotive insurance industry by providing insurers with customers’ real-time personalized data,” says Stan Caldwell, executive director of Traffic21 Institute at Carnegie Mellon University. He says insurers can now assess risk by a driver’s actual behavior rather than the demographic and geographic averages of many drivers.

“Customers who actually drive fewer miles and drive more safely than the average driver can save money,” he adds.