Get to Know the Usage-Based Insurance Model and How to Use It in Your Life!
Have you ever heard about paying for car insurance based on how much — and how well — you drive?
The model known as UBI (usage-based insurance) is revolutionizing the auto insurance industry.
In this article, we’ll explore what’s fueling this boom, how the model works, who is adopting it, what the benefits are, and what to expect in the future.
So, what is UBI anyway?
UBI, or Usage-Based Insurance, is a model where the cost of insurance is calculated based on the driver’s actual habits.
Forget generic estimates: here, what counts is your real behavior behind the wheel.
UBI typically uses small sensors installed in the vehicle and even integrated apps to monitor data such as:
- Mileage driven
- Driving times
- Average speed
- Hard braking
- Sudden acceleration
- Phone usage while driving
Based on this data, insurers can offer personalized discounts and identify low-risk drivers, reducing costs for both sides.
Why Is It Growing So Fast?
Rising Cost of Traditional Insurance
Traditional insurance prices have surged — especially with the increase in accident rates after the pandemic.
UBI emerges as a smart solution: if you drive little and carefully, why pay the same as someone who drives a lot and aggressively?
Technological Advancements
The widespread adoption of smartphones, vehicle sensors, and 5G connectivity has allowed for more accurate, faster, and more accessible data collection.
Today, much of the tracking can be done using just a smartphone app, without the need for physical device installation.
A More Conscious and Digital Consumer
New drivers are more open to exchanging data for savings, understanding that sharing driving habits can be advantageous if it leads to fairer payments and personalized experiences.
Additionally, this generation seeks real-time financial control and prefers on-demand pricing models — just as they already do with streaming and mobility services.
Who Is Using UBI in the U.S.?
According to TransUnion, the number of UBI policies in the U.S. has doubled since 2021.
Currently, about one in five drivers participates in some kind of usage-based program.
The most common profiles are:
- Urban drivers who use their car infrequently
- Retirees and remote workers
- Parents of young drivers (for monitoring)
- Consumers are looking for post-pandemic savings.
With the rise of hybrid and electric cars — which tend to be more connected — this number is expected to increase even more.
Real Benefits: Why Adopt UBI?
Direct Savings
Careful drivers can save 10% to 40% on their annual insurance cost — a big difference in any budget.
Real-Time Feedback
Many apps offer safe driving tips and weekly performance reports, encouraging better habits and even reduced fuel consumption.
Sustainability and Conscious Consumption
Driving less means emitting less CO₂. UBI reinforces more sustainable behaviors by rewarding those who adopt a less car-dependent lifestyle.
Transparency and Personalization
Unlike the traditional model, where the price is based on population averages and often imprecise factors (like ZIP code), UBI offers fairer pricing based on the individual.
But What About the Risks?
Data Privacy
Many people raise concerns about the use of personal data since the insurer basically knows everything you do.
Unfair Penalties
Beyond the risk of data leaks, constant monitoring means a bad day or moment of distraction could cost you more.
Tech Compatibility
Not all vehicles or phones work well with UBI apps — especially in remote areas.
The Future of Auto Insurance Is Here
The growth of UBI is a clear sign the industry is changing. Soon, we’ll see:
- Integration with AI for real-time risk analysis
- On-demand plans (pay-per-trip)
- Partnerships with navigation and mobility apps
- Dynamic discounts based on safe driving goals
With that, auto insurance stops being a “fixed and unavoidable expense” and becomes a personalized, interactive, and intelligent tool.
How to Get Started
Talk to your insurance provider and check if they offer a UBI plan. If the answer is yes, download the recommended app and learn how the monitoring works.
During the evaluation period — usually up to 6 months — drive mindfully and follow your reports to see how you can improve.
If your profile is considered low-risk, you’ll notice the savings when it’s time to renew your policy.