Telematics is the technology insurers can use to fine tune your risk profile and tailor auto insurance rates based on your driving habits. Policies involving telematics are also referred to as usage-based insurance (UBI) because it captures and evaluates how you use your car. The factors tracked vary, but can include driving habits, mileage, weather, road conditions, and even when you drive. Data-collection mechanisms, including smartphone apps and plugged-in or hard-wired devices, can be used to monitor driver behavior. However, participating in a telematics program is voluntary.
Whether UBI programs might be a suitable option for lowering your premiums depends on your driving and which driver behaviors your insurer monitors. Indeed, telematics programs give drivers a financial incentive to drive less and to drive more carefully. The more positively drivers react to the incentive, the less they pay for their insurance. With commercial programs, the fleet owner benefits through lower premiums.