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Telematics and Usage-Based Insurance: What’s Changing and What Consumers Really Think

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By Bob Phillips Info icon
Updated May 16, 2025
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Bob Phillips

Personal Finance Writer

Bob Phillips is a personal finance writer whose expertise in insurance and investments has been developed through over fifteen years as an advisor/tr…

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Beth Swanson

Insurance Analyst

Beth joined The Zebra in 2022 as an Associate Content Strategist. A licensed insurance agent, she specializes in creating clear, accessible content t…

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  • Licensed Insurance Agent — Property and Casualty
  • Associate in Insurance
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Susan Meyer

Senior Editorial Manager

Susan is a licensed insurance agent and has worked as a writer and editor for over 10 years across a number of industries. She has worked at The Zebr…

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  • Licensed Insurance Agent — Property and Casualty
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  1. What is telematics?
  2. Telematics is increasing
  3. Personalized pricing
  4. Customer adoption is growing
  5. Who's offering telematics?
  6. Electric vehicles
  7. What's next?

Tracking, Pricing, and Your Policy

The insurance world is no stranger to innovation, but one of the most rapidly evolving trends in recent years has been the rise of telematics and usage-based insurance (UBI). While these technologies have existed in some form since the early 2000s, today’s models are smarter, more data-driven and increasingly consumer-focused.

From insurers leveraging AI to assess risk more accurately, to drivers grappling with the idea of being monitored behind the wheel, telematics is shaping the future of auto insurance in ways that go far beyond basic mileage tracking. Here's a closer look at where the industry is heading—and how consumers are responding.

What Is Telematics, Exactly?

At its core, telematics involves the use of GPS and onboard diagnostics to monitor a vehicle's movements, speed, braking patterns, and even the time of day it's driven. Insurance companies use this data to determine how safely someone drives, with the idea that safer drivers should pay lower premiums.

UBI policies come in two main forms:

Pay-as-you-drive (PAYD)

You're charged based on how many miles you drive.

Pay-how-you-drive (PHYD)

Takes into account driving behavior, such as acceleration, cornering, and hard braking.

Insurance Companies Are Doubling Down on Telematics

Insurance carriers are leaning hard into telematics policies because it gives them a powerful edge in underwriting.[1] Traditional underwriting relies on factors like age, credit score, ZIP code and past claims. But those don’t always predict future risk accurately.

Telematics changes the game by offering real-time data that reflects actual driving habits. In the past two years, we've seen a surge in:

  • AI-powered analysis: Insurers are using machine learning to analyze telematics data in real time and flag risky behavior.
  • Mobile-first tracking: Many carriers now rely on smartphone apps rather than plug-in devices, making it easier to enroll and gather data.
  • Behavioral feedback tools: Apps now provide feedback to users about speeding, distracted driving or hard braking, encouraging safer habits.
  • Gamification: Some companies use scores, badges, and rewards to keep drivers engaged and improve behavior.

Quick Tip:

Use insurer mobile apps to check your driving score weekly—it can help you correct bad habits before your next rate review.

More Personalized Pricing Is Trending

One of the biggest shifts driven by telematics is the move toward personalized insurance pricing. Instead of relying on demographic stereotypes like credit score or age, insurers can assess risk at the individual level. This benefits low-mileage drivers, seniors, remote workers and careful drivers of all ages.

It also opens the door to short-term and flexible coverage, such as insurance by the mile or even by the trip—something that would’ve been unthinkable a decade ago.

Consumer Adoption Is Growing—Slowly

Despite the technology’s potential, not everyone is eager to let their insurer monitor their every move. A 2024 J.D. Power survey found that only 22% of consumers said they were "very comfortable" with telematics tracking, but that number has been slowly climbing.[2]

Reasons for reluctance include:

  • Privacy concerns

  • Fear of rate hikes for risky behavior

  • General distrust of insurance companies

That said, consumer perception is beginning to shift. Rising car insurance premiums (which increased 19% in 2024 alone) are motivating drivers to explore cost-saving options, including UBI.

The Zebra Customers Speak

We recently asked our audience how many people currently have a telematics policy and there are the results:

  • 74% had either not tried a telematics policy or was unfamiliar with it (meaning insurers needed to step on the marketing on these particular services)
  • 16% had a telematics policy and liked it.
  • 10% had tried telematics and didn't like it

Who’s Winning in the Telematics Space?

Here are a few insurers making major moves:

  • Progressive Snapshot: Offers both plug-in and app-based tracking. Known for significant discounts, but also potential rate hikes.

  • Allstate Drivewise: Focuses on rewards and feedback, without penalizing for bad behavior.

  • Root and Metromile: Usage-based insurance startups built entirely around telematics.

Traditional insurers are either building their own systems or partnering with tech firms. Expect more crossovers between insurance and big tech, especially as cars become more connected by default.

Quick Tip:

Before signing up for UBI, check if your insurer lets you preview your driving score risk-free for 30 days. Many do.

The EV and Connected Car Connection

Telematics is evolving alongside other major trends—most notably, the rise of electric vehicles (EVs) and connected cars. Many EVs already come equipped with advanced data-sharing capabilities, which opens the door for built-in telematics from the manufacturer.

This could disrupt the traditional relationship between insurer and customer, with OEMs (original equipment manufacturers) offering insurance directly, as Tesla already does in several states.

What’s Next for Telematics and UBI?

Here are a few trends to watch over the next two or three years:

  1. Increased transparency: Consumers will demand more clarity on how their driving is scored and how data is used.
  2. Bundled rewards: Look for partnerships between insurers and lifestyle brands, like discounts on gas or groceries based on driving scores.
  3. Regulatory attention: As more insurers rely on data, regulators are beginning to ask hard questions about fairness, privacy, and accessibility.
  4. Standardization of scoring models: Right now, every insurer scores you differently. Expect more pressure for consistency.

Wrapping up

Telematics and usage-based insurance are no longer niche experiments—they’re quickly becoming core to how insurance is priced and sold. For insurers, the opportunity is more accurate risk assessment and lower losses. For consumers, the benefits include potentially lower premiums, real-time feedback, and a more personalized insurance experience.

Still, adoption depends on trust. As technology improves and transparency increases, we’ll likely see broader acceptance, but insurers will need to keep proving that these tools serve the customer, not just the bottom line.

Sources

  1. Telematics use grows in insurance as fleets report fewer claims, crashes.[Insurance Business Magazine]

  2. Auto Insurer Websites and Apps Become Primary Driver of New Customers, Putting Pressure on Digital Experience, J.D. Power Finds. [JD Power]