StateCover Guide
Glossary

Telematics

By Editorial team, last reviewed

Quick answer

Telematics is technology that collects data about how a vehicle is driven and shares it with the insurer. Insurers use it for usage-based insurance (UBI), which ties part of your premium to your actual driving instead of relying only on traditional rating factors such as age and driving record.

How it works

According to the NAIC, the data can come from a device plugged into the car, a car's built-in connected system or a smartphone app. Depending on the program, it may record:

  • miles driven and the time of day,
  • GPS location,
  • rapid acceleration, hard braking and hard cornering,
  • airbag deployment.

Programs come in several forms, including pay-as-you-drive, which focuses on mileage, and pay-how-you-drive, which focuses on driving behavior. The NAIC gives the example that a driver covering long distances at high speed would pay more than one making short trips at lower speeds.

Trade-offs to weigh

  • Privacy. Tracking has raised privacy concerns, and the NAIC notes that some states now require insurers to disclose tracking and limit the data they collect.
  • Price direction. Safe, low-mileage driving can be rewarded, but recorded habits like hard braking can work against you. Ask whether the program can raise your rate or only lower it.
  • What is shared. The amount of data depends on the technology and on how much you agree to share, so read the program terms before enrolling.

Sources

Last reviewed by the StateCover Guide editorial team. See our editorial policy. Spotted an error? Tell us.