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Digital Privacy News

Usage-Based Insurance Is Good for Drivers, But at What Cost?

By Rob Sabo

Safe drivers may receive lower premiums in return for having their habits tracked through usage-based automobile insurance, but many customers aren’t fully aware of the consequences of that huge data exchange.

Known as “pay for how you drive,” usage-based insurance (UBI) allows companies to track drivers through plug-in devices in their cars or via smartphone apps.

Carriers use the driver telematics to set individual rate profiles for customers.

UBI coverage varies from traditional insurance in that companies determine risk profiles and rates by targeting such key demographics as age and location.

The older model results in teenagers paying more for insurance than middle-aged consumers because they, categorically, have higher risk profiles.