What Is Usage-Based Car Insurance?

Usage-based insurance (UBI) — also called telematics insurance or pay-as-you-drive insurance — is a type of auto insurance that sets your premium based on how you actually drive, not just demographic factors like your age, ZIP code, or credit score. Instead of applying broad statistical averages, insurers use real-time driving data to price your policy individually.

Traditional auto insurance lumps you into risk pools based on general characteristics. UBI breaks that mold by rewarding drivers who demonstrate safe habits behind the wheel. Programs are generally offered in two flavors:

Both program types use a telematics device — either a plug-in dongle connected to your car's OBD-II diagnostic port or a smartphone app — to collect your driving data and send it back to your insurer for analysis. The UBI market is growing rapidly, with telematics now included in approximately 14.4% of insurance policies globally. The U.S. market alone was valued at an estimated $4.6 billion in 2025, projected to reach $14.2 billion by 2032 as more insurers and drivers embrace personalized pricing. Roughly 95 insurers worldwide had active telematics programs as of 2025.

What Factors Does Telematics Track?

Every UBI program monitors a slightly different combination of behaviors, but most track these core metrics:

Some programs also factor in weather conditions, road types, and even location data to build a fuller risk profile. Thanks to AI-driven risk scoring — now integrated into programs like Allstate Drivewise and GEICO DriveEasy — telematics analysis has become more sophisticated and personalized than ever. Data is typically collected continuously for the first 4–6 months of your policy and used to calculate your final discount — or in some cases, a rate adjustment.

UBI programs also serve as genuine safety tools. Insurers report that telematics program participants show higher-than-average customer retention rates — a sign that engagement and behavioral feedback keep drivers more connected to their habits. One agency reported that clients using telematics reduced claim frequency by 50% within six months of enrolling. Learn more about how AI is reshaping car insurance pricing and the role telematics plays in that shift.

Major Usage-Based Insurance Programs Compared

Here's a breakdown of the four biggest telematics programs available to U.S. drivers in 2026. These programs are part of a broader array of car insurance discounts that can stack to dramatically cut your premium.

Progressive Snapshot

Progressive Snapshot uses either a plug-in OBD-II device or a mobile app to monitor your driving over a 6-month evaluation period. It tracks hard braking, rapid acceleration, miles driven, phone use, and nighttime driving. You receive an initial discount for signing up — averaging around $169 — but your final rate is adjusted up or down based on your score. Progressive has paid out over $1.2 billion in total Snapshot discounts to date.

• Max potential savings: Average of $322/year at renewal
• Sign-up discount: ~$169 average upon enrollment
• Rate increase risk: Yes — roughly 20% of participants may see higher rates
• Availability: 48 states (not available in CA or HI)
• Best for: Safe drivers confident in their habits; not ideal for frequent nighttime commuters

State Farm Drive Safe & Save

State Farm's program uses a smartphone app (with optional Bluetooth device) to monitor acceleration, braking, sharp turns, speed, and mileage. One key advantage: State Farm does not raise your rates based on your score — even poor habits only reduce your potential discount, never increase your base rate. The initial discount is applied after your first 90 days, then reviewed every 6 months.

• Max potential savings: Up to 30%
• Sign-up discount: 5–10% off immediately upon enrollment
• Rate increase risk: None
• Best for: Drivers who want guaranteed savings without any downside risk

Allstate Drivewise

Allstate Drivewise is a mobile app-based program that continuously monitors speed, braking, acceleration, and distance driven over a minimum of 50 trips. In early 2025, Allstate updated its telematics platform with real-time driving behavior analysis and AI-driven risk scoring for more personalized feedback and premium optimization. Unlike Snapshot, Drivewise monitoring never expires — it tracks year-round and rewards ongoing good habits with recurring discounts at renewal.

• Max potential savings: Up to 30%
• Rate increase risk: Possible for consistently risky behavior
• Best for: Drivers who want continuous engagement and long-term rewards; note that Allstate faces active privacy litigation (see below)

Nationwide SmartRide

Nationwide SmartRide rounds out the top programs with the highest potential discount among major insurers. It uses a mobile app or plug-in OBD-II device to track speed, braking, acceleration, and nighttime and rush-hour driving. Drivers receive an instant 10–15% enrollment discount, with a final discount locked in after about 4–6 months of monitoring. Nationwide does not raise your rates — your score only determines the size of your discount. The program has also earned strong marks in J.D. Power's UBI customer satisfaction studies.

• Max potential savings: Up to 40%
• Sign-up discount: 10–15% immediately
• Rate increase risk: None — discount-only outcomes
• Best for: Safe drivers looking for the largest possible discount with no penalty risk

For a side-by-side breakdown across even more programs — including GEICO DriveEasy — see our UBI programs comparison guide.

You can also explore pay-per-mile car insurance as an alternative if mileage is your primary driver of savings, rather than behavioral scoring.

Who Benefits Most — And Is the Trade-Off Worth It?

Drivers Who Benefit Most from UBI

Low-mileage drivers are the clearest winners. If you drive significantly less than the national average — such as remote workers, retirees, or city residents who rarely use their car — your actual risk is lower than what traditional insurers charge. UBI reflects that reality directly in your premium. Learn more about how annual mileage affects your rates and where you fall on the pricing spectrum.

Safe, cautious drivers also stand to gain substantially. If you brake smoothly, avoid speeding, and aren't on the road between midnight and 4am, telematics data works in your favor. Insurers report that telematics programs create measurable behavioral shifts — with anecdotal evidence showing claim frequency reductions of up to 50% among engaged participants.

Teen and young drivers can also benefit — programs like State Farm's Drive Safe & Save offer an accessible path to lower premiums that would otherwise be sky-high. Learn more about car insurance for young adults and how UBI fits into a broader savings strategy.

Who Should Think Twice

The Privacy Trade-Off in 2026

Privacy remains the biggest concern most drivers have about UBI. Telematics programs collect location data, driving routes, speed, and behavioral metrics — and that data is retained by your insurer, sometimes indefinitely. The regulatory and legal landscape has shifted significantly heading into 2026:

• FTC vs. GM/OnStar (Finalized January 14, 2026): The FTC finalized a landmark 20-year consent order against General Motors and OnStar for collecting and selling consumers' geolocation and driving behavior data — including to insurance data brokers — without adequate notice or affirmative consent. GM is now banned from sharing such data with consumer reporting agencies for five years, must obtain explicit opt-in consent going forward, and must allow consumers to request data copies or deletion. This action set a major precedent for the entire telematics industry.
• Texas AG vs. Allstate/Arity (January 2025): Texas Attorney General Ken Paxton sued Allstate and its telematics partner Arity for allegedly collecting and selling telematics data from over 45 million Americans — gathered through third-party apps like GasBuddy, Life360, and Sirius XM — without proper consent.
• Federal class action against Allstate/Arity (2025–2026): A federal judge allowed a consolidated class action — combining 15 lawsuits across 20 states — to proceed against Allstate and Arity for allegedly harvesting location, speed, braking, and phone use data through third-party apps and using or selling it to adjust premiums. The lawsuits allege violations of the Federal Wiretap Act, the Computer Fraud and Abuse Act, and multiple state privacy laws.
• Indiana AG (March 2025): Indiana's Attorney General filed suit against Arity under the Deceptive Consumer Sales Act, adding further regulatory pressure on third-party telematics data brokers.
• State legislation: North Carolina HB 81 — requiring explicit written driver consent for telematics data use — remains among the most advanced state bills. Maryland introduced legislation barring insurers from canceling policies based on telematics data. Oregon's 2025 privacy law update now requires manufacturers and affiliates to comply with state privacy rules for vehicle-generated personal data. Similar bills in Missouri, New York, and Tennessee have stalled but signal a growing legislative trend. Washington D.C. has also proposed telematics regulation limiting data use to insurance purposes only. Learn more about how AI is reshaping car insurance pricing and the regulatory response.

Key privacy steps you can take:

• Use a plug-in OBD-II device rather than a smartphone app — it limits tracking to your vehicle's trips only
• Read the privacy policy before enrolling, especially regarding data retention and third-party sharing
• Check your state rights — some states grant you rights to access or delete your telematics data
• Opt for no-penalty programs like State Farm Drive Safe & Save or Nationwide SmartRide if you're concerned about both privacy and rate increases

The bottom line: if you're a low-mileage driver or consistently drive safely during daytime hours, UBI programs offer real, measurable savings with a reasonable trade-off. If you regularly drive at night, commute in heavy stop-and-go traffic, or have strong privacy concerns, a traditional policy or a no-penalty program like State Farm Drive Safe & Save or Nationwide SmartRide may be the better fit. You can also review how telematics programs compare head-to-head to weigh all the trade-offs, or see the broader telematics pros and cons before deciding. For an even deeper look at how these programs are covered in the broader insurance landscape, check out the latest car insurance industry trends.

Frequently Asked Questions

Can usage-based insurance actually raise my rates?

Yes — it depends on the program. Progressive Snapshot is the most notable example: roughly 20% of participants see a rate increase after the monitoring period due to risky driving behaviors like frequent hard braking or late-night driving. Programs like State Farm Drive Safe & Save and Nationwide SmartRide carry no rate-increase risk — your score only determines how large your discount is. If you're worried about a rate hike, choose a program that explicitly offers discount-only outcomes before enrolling.

How much can I realistically save with a telematics program?

Most programs advertise savings of up to 30–40% for the safest drivers. In practice, the average participant can save meaningfully on their premium, with Progressive Snapshot averaging $322 annually at renewal and a sign-up discount of approximately $169. Your actual savings depend on your baseline premium, state regulations, driving habits, and which insurer you choose. Signing up for a program with an immediate enrollment discount guarantees some savings regardless of your driving score.

Do I have to use a smartphone app, or can I use a plug-in device?

Most major programs give you a choice. Progressive Snapshot, State Farm Drive Safe & Save, and Nationwide SmartRide all offer either a plug-in OBD-II dongle or a smartphone app. Plug-in devices are generally considered more privacy-friendly since they limit tracking to your vehicle's data rather than your phone's location and usage patterns. Allstate Drivewise is app-only, so if privacy is your top concern, consider a program that offers a hardware alternative.

Does telematics track my location?

It depends on the program and the device type. Plug-in dongles typically track speed, mileage, braking, and acceleration without storing precise GPS routes. Smartphone apps, however, generally require continuous location access — and some insurers retain this data for extended periods or share it with third parties. The January 2026 FTC consent order against GM/OnStar and the ongoing federal class action against Allstate/Arity have put significant pressure on insurers to improve data transparency and obtain explicit consent. Always review your insurer's privacy policy before enrolling.

Is usage-based insurance worth it for occasional drivers?

Absolutely — occasional and low-mileage drivers are among the biggest beneficiaries of UBI. If you drive fewer than 10,000 miles per year, behavior-based UBI or pay-per-mile programs can save you significantly compared to flat-rate traditional policies. Pay-per-mile options charge a low monthly base rate plus a per-mile fee, making them ideal if your driving is infrequent or seasonal. Explore both options to find the best fit — you can also consider on-demand car insurance for maximum flexibility if you drive only occasionally.