Senator Eliot Shapleigh - El Paso, Texas

Tony Hernandez, an El Paso agent for Progressive Insurance, shows where a data recorder may be plugged into a vehicle to measure a driver s habits. The data gathered is then used to set rates under Progressive s new MyRate insurance policy. (Fernie Castillo / El Paso Times)

EL PASO -- Progressive Insurance is now selling car insurance in Texas which requires a driver to let the company monitor his or her driving habits and mileage in exchange for discounted car insurance.

Progressive is one of a handful of companies using new technology to change the way insurance is priced, and as a result, offer lower-priced policies.

In June, Progressive began selling a new insurance product in Texas, MyRate, which requires a driver to plug a palm-sized data recorder into his or her car's computer system to measure how, how much and at what times a vehicle is being driven.

If the data show that the car is being driven in less risky ways and at less risky times of day, the driver can save up to 30 percent on insurance costs, the company reported.

Several years ago, GMAC Insurance began offering low-mileage discounts to drivers in much of the United States, including Texas and New Mexico, with OnStar communications systems in their vehicles. GMAC Insurance each month gets a vehicle's odometer reading through the OnStar system. The insurance company said mileage discounts can range from 13 to 54 percent.

State Farm Insurance recently began testing a mileage-discounted insurance program in Ohio for drivers with OnStar systems. State Farm said mileage discounts could range from 1 percent to 45 percent.

Last year, MileMeter, a 5-year-old Dallas company, became the only company in the United States to sell car insurance by the mile. It uses vehicle odometer readings reported by drivers, but verified by the company through various electronic records.

A MileMeter official said insurance savings can be 25 percent to 75 percent, and even more for some drivers. The insurance is sold only in Texas, but the company wants to expand to other states in the future.

Progressive in 2004 began what has been a slow rollout of its behavior-based insurance product.

"We had to prove we could do this technically and prove customers were willing to do this, and prove the math starts working out," said Richard Hutchinson, general manager of usage-based insurance at Progressive's headquarters in Cleveland.

"We found out we could offer significant discounts to better drivers, and people are willing to do this. And technically it can work in all sorts of different cars and trucks" manufactured after 1996.

Progressive sells MyRate insurance in 15 states, and plans to expand to more states in the future, Hutchinson said. It's not currently sold in New Mexico.

Progressive doesn't divulge how many people are MyRate policyholders, but, Hutchinson said, one in four people who received a MyRate offer accepted it.

"This lets people make the story on why they should get better insurance rates," Hutchinson said. "People who drive less and drive defensively get the best rate."

The insurance probably wouldn't make sense for someone who drives more than 12,000 miles a year, Hutchinson said. However, he added, "people who drive very little, but drive like bandits" wouldn't do well with this type of insurance either.

The data recorder measures whether a driver is "braking or accelerating hard," which could indicate unsafe driving, he said. It also measures a vehicle's speed, when the vehicle is turned on and off, and vehicle mileage.

East Side El Pasoan Jenny Costa, 39, got a MyRate policy in June because she likes the idea of being rewarded for good driving.

"You have to kind of keep yourself in check, which is cool," Costa said. "It does make you feel you're being watched a little, but then you get rewarded. It works for me."

The data recorder transports information via a cellular phone inside the recorder to a Progressive computer so the company and customers can track driving records online.

Costa does not yet know how much the new insurance will save her because Progressive measures driving habits for six months, and then sets a rate based on that record.

It offers new customers an immediate 10 percent discount to try MyRate, which the customer can cancel at any time without penalty, Hutchinson said. A $30 charge for the data recorder also is added to each six-month policy term.

If a person's driving habits are found to be bad, that could cause their rate to increase as much as 9 percent.

Progressive did a lot of research about whether people would be concerned about the Big Brother watching aspects of a monitoring device, Hutchinson said.

"It's a concern by a minority of customers," Hutchinson said. "It's a valid concern," and that's why the program is voluntary and also why the data recorder can't track where a vehicle is, or determine who is behind the wheel, he said.

Chris Gay, founder and CEO of MileMeter, said his company purposely stayed away from using mileage measurement equipment for its pay-by-the-mile insurance products.

"Any tracking device suffers from privacy, convenience and cost problems," Gay said. Odometer readings are "verifiable and protected under law."

MileMeter customers self-report odometer mileage, but the company verifies the mileage by checking a car's emissions-test records, some private maintenance records, and title transfer records quickly available electronically, Gay said.

While MileMeter sells insurance by the mile, mileage doesn't play much of a part in how a driver's rate is set, Gay said.

Rates are based on age, location and type of vehicle, Gay said. "Other insurance companies throw in credit scoring," and a host of other things, Gay said. "We don't believe in that nonsense."

"Traditional insurance carriers are charging when a car is not being used. MileMeter customers only pay for what they use," Gay said.

Customers can buy from 1,000 miles to 6,000 miles worth of insurance at a time, and add more mileage online or by phone, he said. The insurance most benefits people who drive 12,000 miles or less a year, he said.

Gay wouldn't divulge how many customers his company has, but, he said, the company is "healthy and growing" with customers from ages 18 to 90 all over Texas.

"I think it (distance-based insurance) will spread like wild fire" in the future, Gay said.

Hutchinson, at Progressive, expects to see more car insurance products based on behavior measurements and mileage in the future but, he said, it will continue to be only a portion of the multibillion-dollar car insurance industry.

"It will be attractive to a segment of customers who feel better buying on a variable-price model than on a fixed-cost program. It's not for everybody."

Vic Kolenc may be reached at vkolenc@elpasotimes.com; 546-6421.