Auto insurance is a highly competitive line of business, so every advantage counts. Precision is one of these advantages.

Insurers are now able to precisely estimate risk and more accurately price coverage using telematic technology to support usage-based auto insurance (UBI). Using UBI, insurers measure risk based on actual vehicle use. At its simplest, UBI, also known as pay-as-you-drive, might charge for miles driven or time spent running the engine. More advanced implementations might calculate risk exposure based on use by time of day, location or even something as discrete as an individual’s personal driving style.

Insurers benefit from reduced loss costs and significant product differentiation from the competition. Benefits to drivers include reduced accident frequency and severity. Good drivers with low risk profiles may pay lower insurance rates, while all drivers can improve their driving.

Since UBI is new, insurers still need to gather data and use it to understand driving patterns so they can make informed pricing and product choices.