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As a follow-up to my presentation last week, I would like to elaborate on how telematics can be used in real life, specifically in the auto insurance industry. Telematics technology in insurance is commonly known as usage-based insurance, which are customized insurance programs that give the drivers the option of paying a premium based on the miles they drive and/or their driving behavior. These programs give drivers the financial incentive to drive less and to drive more carefully. 

The concept of using how much you drive and how you drive to determine your insurance premium is nothing new. When you’re getting a quote for a policy, the insurance would ask you whether you drive to work every day or only drive on the weekend – which is essentially measuring how much you drive. The company also pulls your MVR (motor vehicle report) to see how many accidents you’ve been in, license restrictions, etc. – which is measuring how you drive. But with telematics technology, it allows the insurance company to better risk assess the customer and give more accurate pricing for the customer. It is also allowing the customer to potentially pay less premium on their auto insurance policy. 


  • Good drivers can get discounted rate based on their safe driving behavior data collected from the telematics device
  • Usage-based programs help minimize the potential unfairness of auto insurers pricing rates based on non-driving factors such as credit score or location by using more relevant driving behavior data
  • Drivers are incentivized to drive less, alleviate wear and tear, reduce the likelihood of an accident, and help reduce carbon emissions 


  • Drivers who drive long distance as daily commute wouldn’t benefit from usage-based insurance
  • Those who work night shifts and commute at night would get relatively higher rates

Three examples of usage-based insurance offered by top insurers:


Progressive’s usage-based option is called Snapshot, it is currently available in all states except for California and North Carolina. Drivers can choose between a plug-in device or a mobile app to record their driving habits – including miles driven, time of the day, hard braking incidents, or hard- cornering incidents. The company evaluates the data collected for 30 days, and if the customer qualifies for a discount it will be applied to the policy


Allstate’s program is called Drivewise, and it is available in all states except for New York. Rather than using a device plugged into the car, their program uses a mobile application to track speed, mileage, hard braking, and other driving habits. Because they use a mobile app rather than a device, the customer will need to manually delete trips when they’re not the driver.

Liberty Mutual: 

Liberty Mutual Insurance offers a program called RightTrack, which uses a combination of telematics devices and mobile app. During the first 90 days of enrolling in the program, the customer will drive with the device plugged into the car, which tracks braking, acceleration, nighttime driving, and how many times driven. At the end of 90 days, the customer will get a discount between 5% to 30% on the auto policy. 

Privacy Concerns

As for the insurers, they must manage different states’ regulatory requirements when it comes to data collected by telematics technology. Many states require the insurance company to obtain approval for new rating plans, which usually include statistical data that supports the proposed rating structure. With so much data that telematics technology is capable of collecting, it comes with privacy concerns. Some states have enacted legislation requiring disclosure of tracking practices and devices. 

In order for usage-based insurance to become more mainstream, drivers also need to be willing for their auto insurance to be determined by how they drive. According to a Willis Tower Watson Survey, 93% of millennial respondents agree that usage-based insurance is the better way to calculate their premium compared to traditional ways.  After all, most new cars nowadays are already connected to the internet either via an in-car or self-installed system. 

The willingness of different age groups to share recent driving data for personalized insurance quotes:

Of the drivers who have used usage-based insurance, most had a positive experience with the technology:

What’s next?

It is almost certain that telematics technology will be the future of auto insurance. Perhaps not everyone is going to benefit from a usage-based insurance policy, but most drivers are willing to use the technology if it meant getting a discounted auto insurance policy. And of those who have tried it, most people had a positive experience. With COVID last year, many people stopped commuting to work/school and leaving their car sitting in the garage for most of the year. While some of the reduced need for driving may be temporary, much of it may be permanent. Telematics technology and usage-based insurance will definitely be a benefit to the many of us who will be commuting and driving less. 

Are you interested in enrolling in a usage-based insurance program? 

If you are already currently enrolled in one, what has your experience been so far?


  1. conoreiremba · ·

    I don’t even have a car but your headline drew me right in! A great follow-up to your presentation Jie and fascinating to see how different insurance companies are engaging with telematics. I know when my younger brother was learning to drive he was using an app similar to the Allstate version and so his trips were being monitored irrespective of who was driving. I think it is a hugely positive development though that so many insurance companies are now using telematics, I know with my friends back home in Ireland, they are always complaining about how their premiums are so high based on demographics such as location and driver age more so than a personal track record. So I think telematics is a fantastic way to give consumers more control over how much insurance they will be paying, as well as the added benefit of promoting all-around safer driving. Really nice post and when I get back behind the wheel I would definitely be in favor of a usage-based program, when I learn to drive on the right side of the road of course!

  2. ritellryan · ·

    I do think usage based insurance is very helpful (since obviously you are less likely to get into an accident if you drive less). The fascinating thing too is it has become almost necessary in this industry to have it. If competitors are offering lower prices to drivers who exhibit good driving behavior, then you will get stuck with all the bad drivers who can’t get auto insurance anywhere else. It is definitely something I would consider as I got older, especially if you could type in estimates and see how it would affect you (since I want to believe I am already in a pretty low risk tier). While your charts indicate skepticism amongst older generations, I think that would be the area of most interest. As people age faster or slower it might change premiums fairly quickly.

  3. Chuyong Liu · ·

    First of all, great topic!!! I was totally just attracted by your topic and click on this blog post. Car insurance has always been a headache for me and I was eager to know this information.

    I have actually personally experienced a friend’s car that has the device plugged into the car. Every time he makes a sort of strong braking or acceleration the device will make a sound to remind him about it. I actually loved this idea since it not only help people save money but also encourages safer driving. My friend is not the best driver and since he got this device it is obvious that he drive more carefully. This is also very efficient price discrimination that would benefit both the insurance company and their customers.

    I would love to see how the car insurance industry would evolve when autonomous cars are around.

  4. sayoyamusa · ·

    Telematics is a new topic to me, so thank you for educating me with your informative blog along with the great presentation last week! Usage-based program totally makes sense and I’d definitely get this type of insurance if I buy a car. I like seeing technology can provide fair deals to everyone. While individual drivers can benefit from a usage-based insurance, companies can also use it as a safety tool. In Japan, it’s becoming a social problem that truck drivers have been forced to drive in a so tight schedule that they often cause deadly car accidents. I think telematics car insurance can be one of the solutions by encouraging transportation enterprises to implement moderate working hours because safety means low cost with this technology.

  5. Nice deep dive into this topic! I know the auto insurers are thinking about how autonomous vehicles will change the insurance industry, and its interesting to think about how data already is! And the title may be the best one of the semester, so far!

  6. lisahersh · ·

    Excellent follow-up to your presentation, Jie! I can definitely see usage-based insurance coupled with telematics being more prevalent in the coming years, especially if a lot of the tech can be integrated into new cars coming straight of the lot (making implementation a breeze). However, I’d be really nervous about my rates increasing, rather than decreasing, as a result of using it. While I’ve never been in an accident, I do have a track record of hitting curbs/poles in supermarket parking lots… Even though no damage, or the occasional very minor scratch, is ever done to the car, I think those incidents would likely get factored in and I’d be viewed as a more risky driver despite having a clean driving record. I also notice that I usually become a worse driver if I know someone is watching and judging me *thinks of every time the husband is in the car with me***. The psychological factor of knowing that my insurance is watching/judging me like a DMV worker during the road test and that my rates are dependent on not making any errors is a lot of stress.

  7. Scott Siegler · ·

    I’m a big fan of this concept, and I think it is smart for society as a whole as it will encourage more drivers to opt into less expensive plans that hold them to a higher level of accountability on the road. Something that I would really appreciate would be if I was able to see a report that broke down the different driving metrics my premium was ultimately based on. That level of transparency would be incredible, and would also help me improve my driving all of the time.

  8. shaneriley88 · ·

    Nice work, Jie! This blog dovetails perfectly with your presentation. It will be interesting to see how data drives efficiency and transparency for both insurers and subscribers. Usage based policies would be great for people that lease cars and don’t need coverage past their typical 12K miles per year!

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