Pay-As-You-Drive changed the business of Auto Insurance. Instead of drivers buying insurance at fixed prices, determined according to crude categories (gender, income, school grades), they pay according to their actual driving habits.

Insurance companies are offering their customers the option to install small recording boxes in their cars, which track the drivers’ behavior. The devices transmit the information back to the insurers, who use it to adjust the price of insurance. People who drive fewer miles, or at lower speeds – pay less. In fact, many other factors affect drivers’ risk, and these too are tracked and calculated into the premiums. Such factors include the hours and location of the vehicle’s operation, rapid acceleration, hard braking, sharp cornering, even the ratio of left turns to right turns.

This “usage-based insurance” is enormously beneficial to consumers. According to a report by insurance regulators, drivers who install the tracking devices in their cars can expect significant discounts on their insurance premiums–up to 30%. There is an obvious reason for these discounts, and a less obvious one. The obvious reason is that more careful drivers, who have fewer bad driving habits to hide, are more likely to agree to be tracked. Insurers therefore anticipate that those who join the program are lower risk, and discount their premiums accordingly.

Read more at Forbes