More about Usage-Based Auto Insurance

Usage-Based Insurance (UBI) is a recent novelty by auto insurers that more closely correlates driving behaviors with premium rates for car insurance. Mileage and driving behaviors are tracked using odometer readings or in-vehicle telecommunication devices (telematics) that are usually self-installed into a special vehicle port or already integrated in original equipment installed by car manufactures.  Check our website to shop around and get car insurance quote.

ubi-studyThe basic idea of telematics auto insurance is that a driver’s behavior is monitored directly while the individual drives. These telematics devices measure a number of elements of interest to underwriters: miles driven; time of day; where the vehicle is driven (GPS); rapid acceleration; hard braking; hard cornering; and air bag deployment.

The insurance company then evaluates the data and charges insurance premiums accordingly. For example, a driver who drives long distance at high speed will be charged a higher rate than a driver who drives short distances at slower speeds..

The first UBI programs began to surface in the U.S. about a decade ago, when Progressive Insurance Company and General Motors Assurance Company (GMAC) began to offer mileage-linked discounts through combined GPS technology and cellular systems that tracked miles driven. These discounts were (and still are) often combined with auxiliary benefits like roadside assistance and vehicle theft recovery. Recent accelerations in technology have increased the effectiveness and cost of using telematics, enabling insurers to capture not just how many miles people drive, but how and when they drive too. .

UBI programs offer many advantages to insurers, consumers and society. Connecting insurance premiums more closely to actual individual vehicle or fleet performance allows insurers to more precisely price premiums. This increases affordability for lower-risk drivers, many of whom are also lower-income drivers. It also gives consumers the ability to control their premium costs by incenting them to reduce miles driven and adopt safer driving habits.

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