Usage-based insurance (UBI): what is it, and where is it going


Since the beginning of the insurance industry, the product type and its pricing 
have depended on data. This data helped to create a customer profile that put the client in different risk categories. 

As you well know, after being classified as a specific risk category, the client would get a policy offer. The downside of this strategy is the outdated variables used for risk assessment and user categorization.This is where usage-based insurance (UBI) comes in with benefits for you as an insurance carrier and your clients. With UBI, each client gets personalized offers based on behavioral data, taking risk assessment to a whole new level.  

How? Continue reading to find out! 

Traditional usage-based insurance 

Traditional usage-based insurance is based on manual reporting. This reporting type only includes information about the driven distance and is collected by the vehicle's odometer. This way, the client pays the price related to the driven distance and can get low mileage discounts 

The tricky part is that this type of insurance largely depends on clients’ honesty. The client can provide photos of the odometer to the insurer for targeted and random checks to prove the driven distance. However, there is a high risk of fraud since photos can be outdated or altered to lower the mileage.  

Honesty check-ups and reporting tasks build the client-insurer relationship, making it harder to communicate pleasantly.  

Telematics technology impact on insurance 

Telematics technology allows different types of data to be transmitted remotely. So it's a remote data transfer technology. Examples of remotely sent data are GPS data, gyroscope, barometer, compass, or accelerometer data, which are now also collected via smartphone. 

GPS enabled devices capture vehicle location and other data essential for creating insurance policies, transmitted over secure cellular networks, and presented using a web-based software platform. 

Telematics technology enables collecting valuable information regarding travel routes, driving behaviors, customer habits, and personal preferences. Driver behavior data also includes actions performed before an accident like hard braking or speeding, which gives excellent insights into accident estimation.  

The main benefit of telematics technology is the productive and cases-based interaction with policyholders to establish long-term partnerships, target more effectively individual requirements and cases, and offer value-added services. 

Usage-based insurance 

The result of introducing telematics technology to the insurance industry is usage-based insurance. As the title said, the main attribute is that thestypes of insurance policies are defined by user behavior.   

Analyzed data collected with telematics technology gives you as insurance carriers detailed reports and insights into client behavior. These reports lead to the creation of personalized offers delivered via the right channel at the right time. 

Usage-based insurance products rely on technology that gathers data and provides insights for you and your clients.  There are seven main types of data gathering technology: 

  • Blackbox 
  • OBD device 
  • OBD + Smartphone hybrid 
  • Smartphone only solution 
  • Bluetooth beacon enhanced (BLE) smartphone solutions 
    • Windscreen-mounted device
    • 12 V socket device 

The most accessible form of usage-based insurance is smartphone-based.It requires just an app-download from your clients to start the data collection and reporting. 

Smartphone-based UBI 

Smartphone apps are facilitating several significant shifts, including: 

  • challenging traditional insurance business models and profit schemes 
  • transforming the customer relationship through automation during quoting and claim submission 
  • expanding the range of insured products through micro-, on-demand, or parametric insurance  
  • integrating insurance coverage into existing services (banking, navigation) 

The app allows building and managing a client relationship that impacts the clients’ experience. Vast new datasets are now flowing to insurers and are used to solve fraud and operational inefficiency issues. More important of all, the driver's risk data has never been so accurate, granular, and personal.  

Smartphones apps in insurance are at the same time a: 

  • risk assessment tool 
  • new customer relationship tool 
  • sales and marketing tool 
  • claims management tool 
  • driver distraction discovery and assessment tool 

From morning to night, drivers interact in a world where they are available through their smartphones. Putting the smartphone as the center of customer interaction has scaled adoption and allowed companies to capture previously unimagined value. 

Want to see it for yourself ? Just download the Amodo Demo app! 

These ecosystems will run independently and compete for attention. Connecting them will be extremely valuable.  

In motor insurance, the critical ecosystems of the future will be around: 

  • The vehicle managed by the manufacturer 
  • The driver managed by the insurer 
  • The phone managed by the platform providers like Amodo

Key influencers expected to boost the insurance telematics market include smartphone-based solutions. In the longer term, vehicle OEMs (original equipment manufacturer) and related service providers primarily drive the connected car trend. 

Have questions about telematics technology and UBI products? Fill out the form below and ask away! 


About Amodo 

The Amodo platform enables insurance companies, digital brokers, and adjacent industries to market pay-as-you-drive insurance services and engage users through smartphones.  Amodos helps insurers get the technology needed to launch PPKM and PPH insurance products and build their customer base. 


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