An article in The Economist XXXXXXXXXXdescribes how the US insurance firm Progressive is offering motorists a discount on their insurance policies if they are willing to instal a device in their cars...

An article in The Economist (2015) describes how the US insurance firm Progressive is offering motorists a discount on their insurance policies if they are willing to instal a device in their cars that monitors their driving behaviour. Another insurance firm, Metromile, offers contracts to motorists where the insurance premium they pay varies with distance travelled. Why would the insurance firms be willing to offer these types of contracts compared to the usual approach of setting insurance premiums based on motorists’ characteristics, such as age and driving history?