Distance

OBDII-based System

In 2008, The Progressive Corporation launched MyRate to give drivers a customized insurance rate based on how, how much, and when their car is driven. MyRate is currently available in Alabama, Kentucky, Louisiana, Michigan, Minnesota, Maryland, New Jersey and Oregon. Driving data is transmitted to the company using an on-board telematic device. The device connects to a car's OnBoard Diagnostic (OBD-II) port (all automobiles built after 1996 have an OBD-II.) and transmits speed, time of day and number of miles the car is driven. 

          This is how OBDII-based System looks like.     

There is no GPS in the MyRate device, so no location information is collected. Cars that are driven less often, in less risky ways and at less risky times of day can receive large discounts. Progressive has received patents on its methods and systems of implementing usage-based insurance and has licensed these methods and systems to other companies. Progressive has service marks pending on the terms Pay As You Drive and Pay How You Drive.

GPS Based System 

In 1998, Progressive Insurance started a pilot program in Texas in which drivers received a discount for installing a GPS-based device that tracked their driving behavior and reported the results via cellular phone to the company. Policyholders were reportedly more upset about having to pay for the expensive device than they were over privacy concerns.The program was discontinued in 2000.

Reasonable Estimation

Several car insurance plans rely on a reasonable estimation of the average annual distance expected to be driven which is provided by the insured. This discount benefits drivers who drive their cars infrequently but has no actuarial value since it is unverified.