At a fundamental level, every auto insurer calculates premium exactly the same way: rate times exposure. But beyond that simple formula are differences as numerous as there are auto insurers, with each carrier trying to come up with the right actuarial wrinkle to give it an advantage in an increasingly commoditized marketplace.

One of those wrinkles is usage-based insurance (UBI), touted as a way to drive greater accuracy into pricing using an objective and equitable exposure base: miles driven. Since vehicles are much more prone to loss when they are on the road rather than in the garage, the idea is to charge higher premiums to policyholders who drive more miles.

Proponents of UBI assert benefits of "pay as you go" extend far beyond accurate premium calculation. In a 2008 report titled "Pay-As-You-Drive Auto Insurance: A Simple Way to Reduce Driving-Related Harms and Increase Equity," The Brookings Institute claimed if drivers paid per mile rather than in a lump sum, almost two thirds of households would pay less for auto insurance. Furthermore, it maintained, because drivers would have an extra incentive to drive less, driving would decline by eight percent nationwide, saving society up to $60 billion a year by reducing driving-related claims and costs.