Support is growing for pay-as-you-go auto insurance, essentially policies with premium levels that are tied to the actual number of miles (or hours) the driver is behind the wheel. It doesn’t take a rocket scientist to figure out the rationale. The less you drive, the less risk you will be in a car accident.

Here’s the interesting thing. Advocates are pointing out that going to this model of insurance would actually encourage people to drive less, which would have a corollary environmental benefit.

At the same time the insurance industry could potentially cut as much as $60 billion a year in auto accident claims paid out, we might also see a 2 percent drop in carbon dioxide emissions and a 4 percent drop in oil consumption — while the average American family would be cutting their annual auto insurance bill by about $270.

Heretofore, the pay-as-you-go model was difficult to verify, requiring certified odometer readings and periodic check-ins. Onboard computer systems on automobiles are taking care of that issue rather nicely.

For instance, GMAC offers a low-mileage discount to its OnStar customers. The program generates a monthly data report anyway, so miles driven is simply added as a monitoring factor. The result? Some OnStar customers are saving as much as 54 percent off their coverage costs.

Only 34 states currently allow some version of pay-as-you-go coverage, but we predict this will become an increasingly popular insurance model over the next year to eighteen months. It’s a win/win for all parties concerned.