What Is Usage-Based Insurance?

Usage-based insurance is a car insurance model that adjusts premiums based on how you drive rather than demographic assumptions. Unlike traditional policies that estimate risk using factors like age, gender, and location, UBI programs utilize telematics devices or smartphone apps to collect real-time data about your driving habits. This allows insurers to offer personalized rates that reflect your actual risk level.

The UBI market continues to expand rapidly in 2026. Valued at approximately $62.6 billion in 2025, the global UBI market is projected to grow at a 24.8% CAGR through 2035. North America leads globally, and as of 2025, 17% of insurance companies now offer UBI programs — up from 15% the prior year. As of 2025, roughly 14.4% of personal motor policies include telematics, with 20 million policies tracked globally via smartphone alone. With full-coverage premiums ranging from $2,144 to $2,697 annually in 2026 depending on the source, UBI offers a meaningful path to savings. Explore cheap car insurance options for additional strategies to reduce your premiums.

How Telematics Technology Works

Telematics technology captures, transmits, and analyzes driving data through three main methods:

Plug-in Devices: Small OBD-II dongles that connect to your vehicle's diagnostic port and transmit data wirelessly to your insurer. These devices are compact, easy to install, and require no technical expertise.

Smartphone Apps: Mobile applications that use your phone's built-in sensors (GPS, accelerometer, gyroscope) to track driving behavior without additional hardware. Smartphone apps have emerged as the dominant tracking method in 2026 because they require no hardware and enable broad consumer reach — supporting roughly 20 million global policies on their own.

Embedded Systems: Modern vehicles with factory-installed connectivity share data directly with insurance companies through partnerships between automakers and insurers. Connected EVs are projected to account for over 30% of new UBI policies by 2030. Learn more about how manufacturer car insurance programs use embedded telematics to price policies.

The technology processes collected information using artificial intelligence and machine learning algorithms to create behavioral risk scores. These scores enable dynamic premium adjustments, driver feedback, fraud detection, and claims optimization. Predictive analytics from telematics data have been shown to reduce at-fault claims by 20–30% via behavioral coaching. See how AI is reshaping car insurance pricing for a deeper look at these algorithms.

Data Collected by UBI Programs

Usage-based insurance programs track multiple data points to assess driving risk:

• Mileage: Total distance driven, typically tracked via GPS
• Speed: Average speeds and instances of exceeding limits
• Braking Patterns: Hard or sudden braking events
• Acceleration: Rapid or aggressive acceleration
• Time of Day: Driving during high-risk periods (late night/early morning)
• Cornering: Speed and force during turns
• Phone Use: Distracted driving detection through app sensors
• Location: Routes and driving patterns for contextual risk assessment

Understanding how car insurance premiums are calculated alongside these behavioral metrics provides a complete picture of how insurers set your rates.

Usage-Based Insurance vs. Traditional Car Insurance

Traditional insurance estimates your risk based on statistical data about people similar to you. If you're a safe driver in a high-risk demographic, you might pay more than necessary. UBI flips this model by rewarding good driving habits regardless of age or other factors, making it particularly beneficial for safe drivers who've been penalized by traditional rating methods.

Types of Usage-Based Insurance Programs

Pay-How-You-Drive (PHYD)

Pay-how-you-drive programs focus on driving behavior quality rather than quantity. Your premium adjustments depend on:

• Smooth braking and acceleration
• Maintaining safe speeds
• Avoiding late-night driving
• Limiting distracted driving

These programs benefit safe drivers at any mileage level, though they may penalize aggressive driving habits. PHYD is ideal for drivers who can't reduce their mileage but maintain excellent driving behavior.

Pay-Per-Mile (PPM)

Pay-per-mile insurance charges a base rate (typically $30–$60/month) plus a per-mile fee, usually ranging from $0.05 to $0.12 per mile. For example, a $35 base rate plus $0.07/mile for 500 miles equals roughly $70/month. This structure works best for:

• Remote workers driving fewer than 500 miles monthly
• Retirees with limited driving needs
• Urban residents using public transportation
• Drivers with backup vehicles

Pay-per-mile programs often include daily mileage caps (typically 250 miles) to prevent unexpected charges on road trips. Some insurers allow you to switch between pay-per-mile and traditional coverage for extended travel periods.

Major Usage-Based Insurance Companies

Here's how the top UBI programs compare heading into mid-2026:

Progressive Snapshot

Progressive's Snapshot program is one of the most widely used UBI programs in the country, with over $1.2 billion in total discounts paid to policyholders. Drivers receive an average sign-up discount of $164–$169 for the initial monitoring period, with potential annual savings of around $322 at renewal for safe drivers. However, approximately 20% of participants may see rate increases based on risky driving data. The program is available in all states except California, with no sign-up discount in Hawaii and North Carolina.

Snapshot evaluates hard braking, time of day, miles driven, and rapid acceleration. Progressive provides detailed trip reports and coaching to help improve your driving score throughout the monitoring period. The app also includes an optional crash detection and accident response feature.

State Farm Drive Safe & Save

State Farm's program offers up to 30% savings with a 5–10% participation discount at enrollment. A key advantage: Drive Safe & Save typically does not increase rates for poor driving (except for possible mileage-based adjustments in some states). The program is available everywhere except California, Massachusetts, and Rhode Island. Drive Safe & Save uses the main State Farm app for tracking, streamlining the experience for existing customers.

Drive Safe & Save uses smartphone tracking of acceleration, braking, speed, time of day, and total mileage. The program emphasizes positive reinforcement rather than penalties for occasional risky behaviors, with a 90-day initial evaluation window.

Allstate Drivewise

Allstate Drivewise rewards safe driving habits through app-based monitoring and offers potential savings up to 30%. Drivewise is available in all states except California. However, a Chicago federal court ruled in March 2026 to allow a class-action lawsuit to proceed against Allstate and its telematics subsidiary Arity, alleging that driving data was collected and sold from 45+ million Americans without proper consent — invoking the Federal Wiretap Act and Fair Credit Reporting Act. The Texas AG also filed a related suit in January 2025. Consumers should review Allstate's current privacy policy carefully before enrolling. See our telematics privacy concerns guide for a full breakdown.

Geico DriveEasy

Geico's DriveEasy program uses smartphone technology to monitor driving behavior nationwide. Safe drivers can earn discounts, though rates may increase for risky driving patterns. The app provides real-time feedback and coaching, and evaluates smooth driving, phone usage, speed, and cornering. Geico DriveEasy pairs especially well with Geico's standalone good driver discount, offering strong combined savings for clean-record drivers.

Nationwide SmartRide

Nationwide's SmartRide program earned top marks in J.D. Power's 2025 UBI Study for the second consecutive year, leading in discounts, app functionality, and onboarding experience with a score of 698 out of 1,000. It offers up to 40% in savings with no risk of a rate increase for poor driving — making it one of the most consumer-friendly options available. Nationwide also offers SmartMiles as a separate pay-per-mile program available in approximately 40 states.

When comparing these programs, consider your full options by reviewing how telematics programs compare on privacy and discounts before you enroll. For a side-by-side breakdown of all five major programs, see our UBI program comparison guide.

Potential Savings with Usage-Based Insurance

Most drivers save between 10–40% on their premiums through usage-based insurance programs. Safe, low-mileage drivers often see the highest discounts, potentially saving hundreds of dollars annually. Actual savings depend on your driving habits, annual mileage, insurer, and state.

Who Benefits Most from UBI?

Safe Drivers: Those with smooth braking, controlled acceleration, and adherence to speed limits maximize their savings regardless of mileage. Learn more about car insurance industry trends in 2026 and how telematics fits into the bigger picture.

Low-Mileage Drivers: Remote workers, retirees, or anyone driving well below the national average of 13,473 miles annually see substantial discounts, especially with pay-per-mile programs. Learn how annual mileage affects your rates with our dedicated guide.

Teen & Young Adult Drivers: Young drivers can prove their safe habits to overcome age-related premium penalties with telematics. See our telematics car insurance guide for a breakdown of the best programs for newer drivers.

Defensive Drivers: Those who avoid late-night driving and high-risk behaviors benefit from behavior-based discounts. Drivers who limit trips between midnight and 4 AM often receive the highest behavior scores.

EV Owners: Electric vehicles increasingly come with factory-embedded telematics, making UBI enrollment seamless. Explore how OEM insurance programs are changing as connected car data becomes central to pricing.

Privacy Concerns and Data Usage in 2026

While usage-based insurance offers real savings, it carries significant privacy considerations that have come to a head throughout 2025 and into 2026. Recent high-profile lawsuits and federal regulatory actions have reshaped the landscape of telematics data sharing — and raised important questions every consumer should ask before enrolling.

Major 2025–2026 Privacy Developments

FTC vs. General Motors (Finalized January 14, 2026): The FTC finalized its consent order settling allegations that GM and OnStar used a misleading enrollment process for its Smart Driver feature — collecting and selling consumers' precise geolocation and driving behavior data without clear disclosure or consent. GM is banned from sharing such data with consumer reporting agencies for five years and must obtain affirmative express consent for any data collection going forward. The 20-year order also prohibits dark patterns and requires GM to allow consumers to request data access and deletion.

Iowa AG vs. General Motors (Filed February 26, 2026): Iowa Attorney General Brenna Bird filed suit against GM and OnStar in Polk County District Court, alleging deceptive collection and sale of telematics data from vehicles dating back to the 2015 model year — affecting over 186,000 Iowa vehicles. The complaint seeks restitution, civil penalties up to $40,000 per violation, and data deletion. This is part of a growing multi-state enforcement wave also involving Texas and Arkansas.

Texas AG vs. Allstate and Arity (January 2025): The Texas AG sued Allstate and its analytics unit Arity for unlawfully collecting and selling Texans' cellphone location and movement data via third-party apps — including GasBuddy, Fuel Rewards, Life360, and Routely — affecting over 45 million records. A related federal class-action consolidating 15+ lawsuits was permitted to advance by a Chicago federal court in March 2026, with claims invoking the Federal Wiretap Act and Fair Credit Reporting Act. The court rejected Allstate's "party exception" defense, a significant ruling for consumer privacy advocates.

Texas AG vs. Progressive and Toyota (April 2025): A separate lawsuit was filed alleging non-consensual data sharing with insurers via third-party data brokers.

These cases underscore why it's critical to review your insurer's privacy policy thoroughly before enrolling. For a comprehensive breakdown of how tracking programs compare on the privacy front, see our telematics car insurance programs guide.

What Happens to Your Data?

Third-Party Sharing: Some automakers share driving data with insurers through data brokers like LexisNexis, Verisk, or Arity — sometimes without explicit driver consent. Recent enforcement actions have directly challenged these practices.

Data Breaches: Collected information could be vulnerable to security breaches. While insurers implement encryption, the risk of data compromise exists with any digital system.

Lack of Transparency: Privacy policies can be complex, making it challenging to know exactly how your data is used, stored, or shared.

Location Tracking: Continuous GPS monitoring raises surveillance concerns, as insurers can potentially track everywhere you drive.

State Legislative Landscape

State and local legislative activity is accelerating in response to public concern and ongoing litigation. Key developments include:

• California AB 1833 (Introduced April 13, 2026): The Consumer Driving Data Protection Act authorizes voluntary telematics opt-in for insurance rating, restricts data use to insurance purposes only, requires data deletion upon request, and prohibits insurers from conditioning discounts on telematics enrollment.
• North Carolina HB 81: Requires written notification and policyholder consent before collecting, sharing, or using telematics data — effective October 1, 2025.
• District of Columbia: The Telematics Data Use in Automobile Insurance Regulation Amendment Act of 2025 limits data use to insurance purposes, prevents monetization, and mandates retention only as needed.
• Oregon: Updated its privacy law in 2025 to specifically cover motor vehicle manufacturers and affiliates that process personal data from vehicle use.
• Maryland SB 984: Requires insurers to disclose what data they collect for telematics purposes.
• Missouri HB 1121: Prohibits insurers from purchasing driving data from third-party sources like vehicle manufacturers.
• New York SB 5486: Would require insurers to publicly disclose how telematics discounts are calculated.
• Tennessee SB 195: Requires insurer consent and disclosure around telematics data use.

Most bills beyond NC, OR, and DC have stalled in committee. Expect accelerating regulatory activity throughout 2026 as states respond to ongoing litigation and federal enforcement.

Tips for Maximizing Your UBI Savings

Follow these strategies to optimize your usage-based insurance discounts:

Practice Smooth Driving: Accelerate gradually and brake gently to avoid triggering harsh event alerts. Anticipate stops well in advance and begin slowing down early rather than braking suddenly.

Limit High-Risk Hours: When possible, avoid driving between midnight and 4 AM, which insurers consider the highest-risk period due to increased accident rates and reduced visibility.

Reduce Mileage: Combine trips, carpool, or use alternative transportation to lower your total miles driven. If you drive very few miles, explore on-demand car insurance as an alternative or complement to a PHYD program.

Avoid Phone Use: Enable "do not disturb while driving" features to prevent distracted driving detection. Many telematics apps automatically detect phone handling while the vehicle is in motion.

Monitor Your Score: Regularly check your driving score and identify areas for improvement through your insurer's app. Many programs provide weekly summaries highlighting your strongest and weakest driving behaviors.

Complete the Full Monitoring Period: Many programs evaluate your driving over 90 days to several months — maintain good habits throughout the entire period for maximum discounts at renewal.

Stack Your Discounts: Combine your UBI savings with other discounts like multi-policy, automatic payments, or paperless billing to maximize your total premium reduction. Verify your mileage reporting is accurate by reviewing how insurers verify your mileage.

Frequently Asked Questions About Usage-Based Insurance

Can usage-based insurance increase my rates?

Yes, some UBI programs can raise your rates if telematics data reveals consistently risky driving behaviors. Progressive Snapshot and Geico DriveEasy are known to potentially increase premiums — approximately 20% of Snapshot participants see rate increases. Programs like State Farm Drive Safe & Save and Nationwide SmartRide typically only offer discounts without surcharge risk, though mileage-based adjustments are possible in some states for State Farm. Always verify your insurer's specific policy before enrolling to understand whether you face only discount potential or actual rate increase risk.

Do I get a discount just for enrolling in a UBI program?

Most programs offer immediate enrollment discounts to encourage participation. Progressive Snapshot offers an average sign-up discount of $164–$169 for the first monitoring period. State Farm Drive Safe & Save provides a 5–10% enrollment discount upfront. These savings apply before the insurer collects meaningful driving data. However, your final discount — or potential rate adjustment — depends on your actual driving behavior during the monitoring period, which typically lasts 90 days to six months.

What happens if I want to opt out of a telematics program?

Most insurers allow you to discontinue UBI programs at any time by contacting your insurer and uninstalling the app or returning the device. If you opt out, you'll typically revert to traditional rating methods based on demographic factors like age, location, and credit score. Some programs evaluate data at policy renewal, so timing your opt-out could help you retain earned discounts through the current policy term. Ask your insurer about data retention and deletion policies before opting out — especially in light of recent lawsuits regarding third-party data broker sharing.

Is usage-based insurance worth it for high-mileage drivers?

UBI can still benefit high-mileage drivers who practice safe driving habits, particularly with pay-how-you-drive programs that focus on behavior rather than distance. However, pay-per-mile programs are generally not cost-effective for drivers exceeding 15,000 miles annually, as per-mile charges accumulate quickly. If you drive frequently but maintain smooth braking, controlled acceleration, and safe speeds, behavior-based programs like State Farm Drive Safe & Save or Nationwide SmartRide could still offer 10–30% savings despite higher mileage. Compare UBI and traditional quotes before enrolling.

How long does it take to see savings with usage-based insurance?

Many insurers offer immediate enrollment discounts of 5–10% from your first premium payment. Behavior-based discounts typically apply after a monitoring period of 90 days to six months, with final adjustments made at policy renewal. Some programs provide mid-term adjustments for exceptional driving, while others wait until renewal to apply the full discount. Consistent safe driving throughout the monitoring period maximizes your savings potential. Check with your specific insurer to understand their evaluation timeline and whether earned savings require ongoing monitoring to maintain at renewal.