What Is Usage-Based Car Insurance (UBI)?

What is usage-based insurance?

Usage-based insurance (UBI) programs use your driving behavior to help calculate your car insurance rates. Also called telematics car insurance, these programs track your driving and reward safe driving with discounts. There are two main types of usage-based insurance:

• Pay-how-you-drive insurance. Tracks your driving behavior, such as speed, phone use, hard braking, hard acceleration, sharp cornering, mileage and time of day. Better driving results in a discount. For example, you might receive a better score if you don’t drive late at night, such as between midnight and 4 a.m. 
• Pay-per-mile insurance. Tracks your mileage only, with lower mileage resulting in a discount. Mileage-based programs are less common than driving behavior-based programs. 

Only 17% of insurers offered a UBI program in 2025, according to J.D. Power. That’s down from 22% in 2023. But among the large insurers we analyzed to find the best car insurance companies, 80% offer a UBI program.

How insurers track driving behavior

If you enroll in a usage-based insurance program, your auto insurer will have you use a method for tracking your driving, such as:

• An app that you install on your smartphone
• A plug-in OBD-II device under the dashboard, usually near the steering column
• A bluetooth beacon that pairs with your insurer’s mobile app
• Connected-car technology already in your vehicle, such as OnStar
• Self-reported data

If you use a mobile app, each driver on your policy can download it and set up their own profile. A recent J.D. Power study found that app-based UBI programs have the lowest customer satisfaction (628 points out of 1,000), compared to self-reported data (640 points), a plug-in device (656 points) or a vehicle system or onboard computer (703 points). 

The driving habits tracked by your insurer will vary, but generally includes instances of:

• Harsh acceleration
• Hard braking
• Mileage
• Phone use
• Speed
• Time of night you drive

How UBI scoring works

The specific driving behaviors tracked will vary by UBI program, as will the weight given to each factor in calculating your resulting rate. Each drive is tracked. You can typically view individual trips and see highlights of when you had incidents that lowered your score.

Once you enroll in the program, you can expect to:

• Receive a driving score. Your score will generally update every week or so, but this depends on the insurer and program. 
• Potentially see discounts. You typically get the sign-up discount at your first billing cycle, and the larger UBI discount at renewal if you receive a good enough driving score. 

Some insurers will raise your rates if you drive poorly in a UBI program, but it would have to be consistent aggressive or risky driving, according to Gary Hallgren, president of Arity, a mobility data analytics company owned by Allstate that collects and analyzes driver behavior for UBI programs and traffic and safety insights. 

“You have to do these behaviors a lot, and repeatedly over time, to not be in a really good category,” says Hallgren. 

Your driving behavior will only be one factor that impacts your rate. Your location, age, claims history, car make and model and more will affect the cost of car insurance.