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Consumer Insight

Sept. 8, 2021

Want Your Auto Insurer to Track Your Driving? Understanding Usage-Based Insurance 

Imagine a world in which your auto insurer monitors your driving using a cell phone, embedded technology, or a device. The insurance company receives data on your driving which, in turn, helps to determine the amount you pay for coverage. This is a reality today for some—it’s called usage-based insurance (UBI) or telematics and increasing numbers of insurers are offering this option. If you’re thinking of signing up, make sure to thoroughly understand the program, including the pros and cons.   


How UBI works. UBI tracks driving behavior through devices installed in a vehicle or through smartphones. The devices can measure miles driven, time of day, where the vehicle is driven, rapid acceleration, hard braking, hard cornering, cell phone usage and airbag deployment. Depending on the insurer and what is allowed in the state, the data collected is then used by insurers to help determine premiums. 

UBI premiums vs. traditional auto premiums. There are several variations of UBI including pay-as-you-drive, pay-how-you-drive, pay-as-you-go and distance-based insurance. Traditional auto insurance relies on actuarial analysis of data including driving records, credit-based insurance scores, personal characteristics, vehicle types, garage locations and more. A UBI program adds individual driving behaviors as an additional rating factor. UBI may directly impact your premium because programs associate costs with individual and current driving behaviors, instead of relying on statistics based on past trends and events. For example, if you mainly drive short distances at slower speeds, you will probably be charged less than a driver who drives long distances at high speeds. 

Pros and cons of UBI. Like any policy there are several advantages and downsides to UBI. 


  • Premiums should be priced more accurately by linking costs to driving performance. 

  • If you have driving habits associated with lower risks, it can help save you money. 

  • It can motivate drivers to improve driving habits such as avoiding hard stops or bursts of acceleration. 

  • Real-time tracking may accelerate the response time if you’re in an accident.


  • Insurers tracking mileage and monitoring behavior raises privacy concerns. 

  • The technology is still relatively new and insurers are still developing how raw data collected will be used to price auto insurance policies.  

  • Not everyone is a better than ‘average’ driver and may not be eligible for discounted rates. 



Honestly evaluate your driving habits: While the commercials for UBI promote the discounts drivers can receive, it can also lead to higher premiums. Before making the jump to UBI, know what you are signing up for. 

Know what data is collected: Make sure you trust your insurer with your information. Research what devices will be used to monitor your driving and fully understand what behaviors will be tracked.  

Prepare for the future of UBI coverage: As tracking technology develops, UBI will become more common. Mobile phone apps are also being used to monitor driving behavior. If there are flaws in your driving habits you should start trying to correct them, as the technology shift suggests UBI may become the most common way to determine auto insurance premiums.  


  1. UBI or usage-based insurance uses information about your driving behavior to determine your auto policy premium, as opposed to traditional auto policies that use actuarial analysis of data like driving record, vehicle type, and insurance credit score. 

  1. Conduct an honest assessment of your driving behavior to determine if UBI can offer you discounts. 

  1. Know exactly what driving data is collected and used by your insurer to determine your UBI premium. 

About the National Association of Insurance Commissioners

As part of our state-based system of insurance regulation in the United States, the National Association of Insurance Commissioners (NAIC) provides expertise, data, and analysis for insurance commissioners to effectively regulate the industry and protect consumers. The U.S. standard-setting organization is governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer reviews, and coordinate regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally.