Update: Progressive has announced a more fine-grained approach to use-based insurance pricing. Cars can be fitted with a ‘black box’-type device that records acceleration patterns, brake usage and other important data the insurance company believes contributes to a driver’s risk profile. Progressive is also quick to point out it does not record the car’s actual path, however, so Orwellian nightmares are at least somewhat allayed.

Those that sign up for the optional program get a first-term discount of 10%, though after the system has recorded their information through that period, their rates could decrease as much as 60%, depending on how and how much they use their cars. Drivers that ‘jack-rabbit’ away from stoplights and slam on their brakes frequently, however, could face rate hikes of up to 9%, reports The Detroit News.

"We want people to know that the program is not right for everyone," said Richard Hutchinson, a Progressive general manager. "It's for people who drive at low-risk times of day and who keep alert for others on the road. They don't make fast lane changes or follow too closely behind other drivers so they don't have to overreact or slam on the brakes."

Original: Technology's ever-advancing march into the automotive field is taking an interesting, and possibly ominous, turn. Insurance companies are using technology like GM's OnStar to track distance, speed and manner of driving. 'Good' drivers - that is, those that drive slowly and little - are rewarded with lower premiums, while drivers that spend many miles on the road or traveling at high speed end up paying more.

The technology is at this point voluntary. The first two major U.S. insurance companies to use the devices are Progressive, which has had the program available on an opt-in basis since 2004, and GMAC Insurance. Other companies in places like Italy, Canada and Australia are already using the devices, or will soon start, reports The Wall Street Journal. The devices are capable of measure many of the intimate details of a car's use, including accelerator position, speed and braking frequency and pressure, in addition to miles driven and many other data points.

Insurers hope to use the technology to introduce usage-based insurance pricing, which the companies claim would lead to lower premiums for two-thirds of American households. That would also result in a correspondingly large increase in the premiums of the remaining one-third, however.

Environmental and traffic advocates see the system as a way of providing an incentive to drive less - save the planet, and the commute time by saving on your insurance premium. Modeling by these advocates indicates usage-based insurance could lower total vehicle miles by as much as 8% per year, reducing traffic, accidents and fuel consumption along the way.

The flip side of the coin reveals a 9% surcharge for drivers that travel distances the insurance companies deem 'excessive'. The loss of privacy is also a concern. Progressive's system operates much like a flight recorder, taking down data from the car's computer, but not logging any GPS or location data. GMAC's system, on the other hand, relies on a subscription to GM's OnStar service.

Those worried about the Big Brother aspects of the otherwise attractive reduced payments that could come with a pay-as-you-go car insurance plan can breathe a little easier as GMAC guarantees that the only information collected for the program by the OnStar device is an email containing the car's odometer reading. The odometer reading itself is forwarded from the OnStar system's monthly diagnostic email, so in reality no additional information is collected at all, it's just distributed to GMAC Insurance as well.

The news may clarify the role of GM's OnStar device in the program, but other systems used by insurance companies do in fact record GPS data, and that factor has been a deterrent in their adoption. Perhaps if more insurance companies find a way to get the information they need in relatively unobtrusive ways, the rising price of fuel will help push more drivers to adopt the metered insurance plans as they cut their driving distances to save at the pump