Telematics and usage-based car insurance: what’s tracked, how it changes your premium, and the state rules that limit it

Short answer: Usage-based insurance (UBI), or telematics, prices your auto policy partly on how you actually drive, using a smartphone app or a device in the car. The NAIC says programs can measure miles driven, time of day, where you drive, rapid acceleration, hard braking, hard cornering and airbag deployment, and that your premium may go up or down depending on what the data shows (NAIC). Rules differ by state. Maryland requires insurers to give 45 days’ written notice before a telematics-based increase or loss of a telematics discount, naming each measured driving behavior and the share of the increase due to the program (MIA Bulletin 24-26). California’s rating regulation lets insurers use a device to verify actual miles driven, but bars using it to collect or store the vehicle’s location for that purpose (10 CCR 2632.5).

The main program types

The NAIC groups UBI into variations including pay-as-you-drive, pay-how-you-drive, pay-as-you-go and distance-based insurance (NAIC). In plain terms:

• Mileage-based (pay-per-mile): a base charge plus a per-mile rate, or a discount tied to verified low mileage.
• Behavior-based: a score built from braking, acceleration, speed, cornering, time of day and, in some programs, phone handling.
• Participation discount, then score: some insurers give a discount for enrolling, then replace it with a score-based factor after a monitoring period. Maryland’s insurance regulator specifically lists that transition as a possible source of a premium increase (MIA Bulletin 24-26).

Traditional rating still applies underneath. The NAIC notes that conventional auto pricing relies on factors such as driving record, credit-based insurance score, vehicle type and garage location, and that UBI adds individual driving behavior as another factor (NAIC). Washington’s insurance commissioner says the same: insurers may combine telematics data with traditional factors (WA OIC). For the credit piece, see what an insurance score is.

What gets tracked

Not every program measures all of these. The enrollment terms should list exactly which data is collected and how long it is kept.

Can my rate go up?

Yes, depending on the insurer and program. The NAIC and Washington’s commissioner both say premiums may rise or fall with driving behavior, and Washington adds that not every driver will meet the standard for a discount (NAIC; WA OIC). Maryland’s bulletin describes how increases happen in practice: an insurer may move you to a higher risk category, reduce or remove a discount, or add a surcharge based on measured driving — or act because you didn’t produce enough driving data to qualify (MIA Bulletin 24-26).

State example: Maryland’s notice rules

Maryland Insurance Article §27-614 requires 45 days’ written notice before an insurer increases a policy’s total premium, including through a reduced or removed discount, unless the change is part of a general rate increase. The Maryland Insurance Administration’s Bulletin 24-26 (Dec. 23, 2024) confirms this applies to telematics. A compliant notice (MIA Bulletin 24-26):

• must state the percentage of the increase attributable to the telematics program;
• must identify each driving behavior measured and used in the calculation;
• may not list factors other than measured driving behaviors;
• must say so specifically if the increase is because you produced insufficient data or dropped out; and
• may not use vague phrases like “may have included” or “based on factors such as.”

The bulletin notes that a month-to-month increase on a pay-per-mile policy caused solely by driving more miles (at the same per-mile and base rates) is not subject to this notice rule, while removing a low-mileage discount based on an odometer reading is (MIA Bulletin 24-26). In Maryland, if you complain about or protest the increase, the insurer must be able to provide all relevant data measured about you through the program (MIA Bulletin 24-26).

State example: California allows verified mileage, not location rating

California makes annual miles driven one of its mandatory auto rating factors. The Department of Insurance’s 2009 pay-as-you-drive regulation lets insurers use verified actual miles instead of estimates, and lets them offer coverage priced per mile (CDI advisory notice). Under 10 CCR 2632.5:

• An insurer may use a technological device only to collect information for actual miles driven under that rating factor, and may not use it to collect or store information about the vehicle’s location — though location may be used for emergency road service, theft, map or travel services.
• If an insurer offers both estimated and verified mileage programs, participation in verification is voluntary; it can’t require you to provide verified mileage.
• Every verification method it offers must be available to all insureds equally.

Questions to ask before you enroll

The NAIC and Washington suggest asking yourself whether you trust your insurer with the data and whether your driving is likely to help or hurt you (NAIC; WA OIC). Add these practical ones:

1. Can this program raise my premium, or can it only reduce a discount?
2. Which behaviors are scored, and is phone use one of them?
3. Is it app-based (whose phone, which trips count when I’m a passenger?) or a plug-in device?
4. How long is the monitoring period, and what happens if I drop out?
5. Can the insurer use the data when settling a claim? The NAIC lists this as a question to ask (NAIC).
6. Is the data shared with anyone else, and how do I request a copy?

Alabama’s Department of Insurance sums it up: assess your driving honestly, and know exactly what data your insurer collects and uses (ALDOI).

Teens, households and multiple cars

Before enrolling a car that a new or teen driver uses, ask the insurer how trips are assigned to a driver and whose driving the score reflects; the answer decides whether the program helps or hurts your household’s premium. See teen driver car insurance for the broader picture, and car insurance cancellation and nonrenewal notice rules by state if a renewal offer changes sharply.

Related: electronic proof of auto insurance by state and the state insurance rules hub.

Frequently asked questions

Alishahi Insurance · 439 N Canon Dr, Penthouse, Beverly Hills, CA 90210 · (877) 711-4545 · CA License #4348151. General information only. This isn't legal, tax or financial advice or a coverage determination. Coverage depends on policy language and underwriting, and rules vary by state.