Telematics Car Insurance: What to Know
Usage-based insurance allows insurers to monitor certain behind-the-wheel behaviors. In exchange, you may get cheaper car insurance rates.
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Written byEmily Guy Birken
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Plutus Award winner
12+ years writing about insurance and personal finance
Emily is a widely recognized expert on personal finance and has authored several personal finance books. She’s a frequent guest on national and regional media.
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Edited byCourtney Mikulski
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Courtney MikulskiSenior Editor, Auto
3+ years producing insurance and personal finance content
Main architect of the Insurify Quality Score
Courtney’s deep personal finance knowledge extends beyond insurance to credit cards, consumer lending, and banking. She thrives on creating actionable content.
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Reviewed byMark Friedlander
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Corporate communications director for Insurance Information Institute
20+ years in insurance and communications
As Director, Corporate Communications for Triple-I, Mark serves as the non-profit’s national spokesperson, sharing information and education on a wide array of insurance issues.
Updated November 21, 2024
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Telematics-based insurance allows auto insurance companies to tailor your premium costs to your driving behavior. Telematics devices — which include technology built into the car, plug-in devices, or smartphone apps — provide insurers with a more holistic view of your behavior on the road.[1]
Many insurers offer discounts to drivers who accept telematics monitoring. In fact, eight out of 10 telematics-using drivers surveyed by the Insurance Research Council said their auto insurance costs declined and their driving improved after using telematics. But some drivers may see their rates go up if their telematics device detects poor driving habits. Additionally, privacy concerns and potential inaccuracies in telematics devices may worry some drivers.
Here’s what you need to know about telematics insurance to decide if it’s right for you.
Quick Facts
Telematics-based car insurance helps reduce the risk of crashes by about 50%.[1]
Telematics devices use sensors and GPS to measure acceleration, braking, and when and where the car is moving.
Insurers may sell or share data gathered via telematics-based insurance with third parties.
Table of contents
What’s telematics-based car insurance?
The insurance industry is all about predicting and mitigating risk. Traditionally, auto insurance companies were only able to predict a driver’s risk of making a claim and set their rates based on driving record, demographics, location, type of car, age, gender, credit history, and self-reported mileage driven per year.[2]
The creation of telematics-based technology allowed insurers to gather much more information about drivers to more accurately predict risk. Telematics devices can measure a number of driving behaviors that can help insurance underwriters better understand a driver’s likelihood of getting into an accident or filing a claim.
Plug-in devices you install in your car, pre-installed devices, and mobile apps are among the different telematics devices that monitor driving. These devices use sensors such as accelerometers and gyroscopes to measure things like acceleration and braking, as well as GPS data to measure when and where the vehicle is in motion.[3]
Insurance companies incentivize telematics monitoring by offering discounts to drivers who use it. This is partially because telematics devices help insurers make more accurate risk calculations. But insurers have also found that consumers drive fewer miles and drive more safely when using telematics devices, since a lower insurance premium can be a motivator. In fact, studies have found that usage-based insurance programs can reduce the risk of accidents by 50%.[1]
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What are the types of telematics devices?
Insurers may use several different types of telematics devices to monitor your driving behavior.
Depending on your vehicle and your insurer, you may use any one of these telematics devices.
Pre-installed
Some car manufacturers offer original equipment manufacturer (OEM) telematics devices pre-installed in new cars. When the U.S. General Services Administration leases fleet cars to federal government employees, the vehicles come equipped with OEM telematics.[4] However, consumers may also use their pre-installed OEM telematics devices to monitor driving behavior, both for usage-based insurance purposes and also for personal use.
Manufacturers often integrate embedded OEM telematics devices with the car’s infotainment system, which can easily connect to the driver’s smartphone.
In most cases, pre-installed OEM telematics systems have free activation and no charge for a promotional period. After that point, a monthly subscription charge for certain services connected to the telematics device may apply.[5]
Mobile apps
Most smartphones feature an accelerometer, gyroscope, and GPS, which means they have the necessary tools to track driving behavior. That’s why several insurance companies, as well as third-party telematics companies, offer mobile apps that work as telematics monitors.
These apps generally need to run in the background to work, which means you must consistently have your phone with you and on while you’re driving. The app may drain your smartphone's battery.
Some drivers may feel uncomfortable with the idea of their insurer monitoring their driving behavior via their smartphone and that using a telematics app may increase their insurance premiums. Additionally, though insurance companies claim their telematics mobile apps can differentiate between when someone is behind the wheel or in the passenger seat, it’s possible that an app will incorrectly gather information when you’re not driving.
Plug-in devices
Plug-in telematics devices collect data about your driving habits and transmit that data via wireless phone networks to your insurance company. The most common type of plug-in device is an OBD II, which plugs into your vehicle’s onboard diagnostic port (OBD-II port) located under the steering wheel. Every car and light truck manufactured in the U.S. after 1996 has an OBD-II port.[6]
Insurers offering plug-in devices will generally send the device to you and have you plug it in yourself as part of a simple setup process.
Bluetooth
Bluetooth-enabled telematics devices connect wirelessly to a mobile app. This allows the telematics device(s) in a shared car to correctly identify the driver, since the Bluetooth will connect to the individual driver’s app.[6]
What information does telematics monitor?
The National Association of Insurance Commissioners (NAIC) reports that the behaviors telematics devices measure may include:[1]
Miles driven: How much you drive affects your premiums. The more you drive, the more likely you are to get into an accident. Conversely, if you don’t drive often, you’re less likely to be in an accident and file a claim.
Time of day you drive: Driving during peak traffic hours, like 4 p.m. to 6 p.m., can increase your premiums.
Where you drive the vehicle: If you drive on busy roads or in populated cities, it can affect your likelihood of getting into an accident.
Rapid acceleration: If you commonly exceed the speed limit to pass a slower car or speed up to make it through yellow lights, your insurance company may note your behavior and increase your premiums.
Hard braking: Hard braking can lead to skidding or losing control of your vehicle, which increases your risk of an accident.
Hard cornering: Taking turns too fast is a dangerous habit that can cause single- or multi-car accidents.
Airbag deployment: Your insurance company wants to know when you’ve been in any incident that causes the airbag to deploy.
In addition to this information, a telematics mobile app will know if you make or take a phone call while driving, but it won’t know who you’re talking to or what you’re saying.
Mobile telematics apps regularly transmit data to the insurance company, usually via wireless phone networks. Some smartphone apps use Wi-Fi to transmit the data.
Unfortunately, once the insurance company has this information, it may then sell it to a third party. For example, Allstate’s data collection company, Arity, has made its 1 trillion miles worth of collected driving data available to marketers, as well as allowing insurers to access any individual driver’s specific driving behavior score. Arity has also partnered with navigation app GasBuddy to tailor suggestions to drivers based on their behavior.
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*Quotes generated for Insurify users within the last 10 days. Last updated on November 21, 2024. Actual quotes may vary based on the policy buyer’s unique driver profile.
Rates shown are real-time Insurify user quotes from 100+ insurance companies and Quadrant Information Services data. Insurify’s algorithm excludes anomalous quotes and anonymizes personal details, then displays refined quotes by price, date, and insurer popularity up to 10 days ago from November 21, 2024. Actual quotes may vary based on the policy buyer’s unique driver profile.
Telematics car insurance pros and cons
Telematics car insurance can help consumers feel more in control of their insurance premiums — but at the cost of insurers closely monitoring them while driving.
Here are some benefits and drawbacks to consider:
Pros
Safe drivers can potentially save a significant amount of money with telematics-based insurance.
The mere presence of a telematics device often promotes safer behavior on the road.
Many insurance companies offer discounts simply for agreeing to use a telematics device.
Specific driving feedback may help drivers improve bad driving habits.
Cons
Telematics-based insurance closely monitors driving behavior, which may feel like an invasion of privacy.
Insurance companies may share your driving data with other insurers or third parties.
Drivers may see an increase in insurance premiums based on the data telematics devices gather.
Telematics devices, particularly mobile apps, may not accurately identify who’s driving.
Where to get telematics-based car insurance
Many insurers offer usage-based insurance options using telematics devices. Insurify identified six major auto insurance companies that not only offer telematics insurance but also score highly on the Insurify Quality (IQ) Score. The IQ Score is a rating on a scale of 1 to 5 that considers an insurer’s financial rating, customer satisfaction, affordability, customer support and transparency, and availability and reach.
Here’s what you need to know about the telematics insurance programs from each of these top-scoring companies.
Company and Telematics Program ▲▼ | IQ Score The Insurify Quality (IQ) Score uses more than 15 criteria to objectively rate insurance companies on a one-to-ten scale. The Insurify editorial team researches insurer data to determine the final scores. ▲▼ | Average Monthly Cost for Full Coverage ▲▼ | Average Annual Savings with Telematics Program ▲▼ |
|---|---|---|---|
| Progressive Snapshot | 8.4 | $238 | $156 |
| StateFarm Drive Safe & Save | 9.3 | $175 | $630 |
| USAA SafePilot | 9.4 | $152 | $547 |
| American Family DriveMyWay | 9.1 | $227 | $545 |
| Erie YourTurn | 9.0 | $132 | Potential gift card rewards |
| GEICO DriveEasy | 9.0 | $178 | Varies based on driving habits |
Disclaimer: Table data sourced from real-time quotes from Insurify's 50-plus partner insurance providers and quote estimates from Quadrant Information Services. Actual quotes may vary based on the policy buyer's unique driver profile.
Our editorial team spent more than 350 hours developing the Insurify Quality (IQ) Score and scoring insurance companies. The IQ Score objectively analyzes and calculates a score for insurers using more than 15 crucial criteria. The team weighted criteria by importance to the consumer — factors such as customer reviews and affordability influence the score more than availability and third-party ratings.
We rate each company on a 1 to 10 scale based on five categories: financial ratings, customer satisfaction, affordability, customer support and transparency, and availability. Insurify updates ratings once a year or as more recent information becomes available.
- Third-party financial ratings: Insurify uses data from AM Best, S&P, Moody’s, and more to compare insurance companies’ credit and ability to pay out future claims.
- Customer satisfaction: To calculate this score, Insurify analyzed more than 28,000 customer reviews across 155 car insurance companies. We also consider third-party ratings from J.D. Power, the National Association of Insurance Commissioners, and Trustpilot.
- Affordability: Our data scientists analyzed more than 90 million real-time auto insurance rates from our partners across the U.S., as well as available discounts, to calculate an affordability score.
- Customer support and transparency: This measures coverage options, ease of claims filing, and the insurer's transparency surrounding discounts, coverages, and claims process.
- Availability and reach: Insurify scores availability and reach by identifying the number of states in which insurers offer coverage and company size by market share.
Progressive Snapshot
Available as either a plug-in telematics device or through a mobile app, the Progressive Snapshot program rewards drivers for limiting hard braking and rapid acceleration, driving less overall, avoiding getting behind the wheel between midnight and 4 a.m. on weekends, and staying off the phone while driving.
Progressive offers an automatic discount for signing up and may provide a discount based on driving behavior. Though risky driving may increase your rates, 80% of drivers maintain or reduce their rates via Snapshot.
Potential savings: The average driver saves $47 for the initial sign-up discount and $156 annually.
Availability: Snapshot isn’t available in California. Availability and details may vary from state to state.
May be good for: People who drive fewer miles than average annually.
StateFarm Drive Safe & Save
StateFarm’s Drive Safe & Save program is available either as a mobile app or through the embedded telematics device in a 2020 or newer Ford or Lincoln Drive Safe & Save Connected Car. Drivers are eligible for an automatic discount for signing up and can save up to 30% (and possibly more, depending on location) based on their driving behavior.
StateFarm promises that the Drive Safe & Save program is always a discount, which means you won’t get higher rates because of any negative driving behavior the device captures. Also, the insurer promises to never sell information it gathers through telematics.
Potential savings: Discounts of up to 30% are available, and discounts may exceed 30% (except in New York, where caps apply). The average driver receiving a 30% discount could save $630 per year.
Availability: The program isn’t available in California, Massachusetts, or Rhode Island.
May be good for: Drivers who worry that telematics-based insurance may increase their premiums, and don't want their information shared with third parties.
USAA SafePilot
USAA SafePilot is a telematics mobile app that gathers information about your driving behavior and habits and assigns you a driving score. You can see specific driving insights and trends on the mobile app that can help improve your habits behind the wheel. SafePilot is only a discount program, and the driving behavior the app detects won’t negatively affect your premiums.
The SafePilot app also uses crash-detection technology, which identifies when there’s been a potential accident. USAA will reach out to the driver via the app to make sure everything is OK, and the driver can even call 911 through the app.
Potential savings: Discounts of up to 30% are available; 10% discount on initial sign-up with the program. The average driver receiving a 30% discount could save $547 per year.
Availability: The program isn’t available in California, Delaware, or New Jersey. And USAA only covers members of the military community and their families.
May be good for: Parents of teen drivers will appreciate SafePilot’s accident-detection technology.
American Family DriveMyWay
American Family offers drivers a 100-day trial period of its telematics mobile app, DriveMyWay. Signing up for the program entitles you to a 10% automatic discount for enrolling. The app will track your driving habits and provide tips and suggestions for safer driving.
After 90 days of using the app, American Family will email you to let you know how your score is trending, and you can decide if you want to continue with DriveMyWay.
From there, drivers have three options:
Get a personalized rate based on your driving score and keep the app. If you do this, you’ll receive a 5% ongoing participation discount. Your personalized rate could save you 5% to 20%, but higher-risk drivers may see their rates increase.
Lock in your current score and get a personalized rate based on it, but delete the app. This means losing out on the 5% participation discount, but you can keep your rate based on your current driving behavior.
Unenroll before the 100-day trial period has lapsed, and American Family will not use DriveMyWay data to calculate your insurance rate. However, you’ll lose the 10% automatic discount.
DriveMyWay is currently only available in Arizona, Colorado, Iowa, Idaho, Illinois, Indiana, Missouri, North Dakota, Nebraska, Ohio, Oregon, South Dakota, Utah, and Wisconsin, but will soon be available nationwide. Drivers in Kansas, Minnesota, Nevada, and Washington can enroll in American Family's KnowYourDrive telematics program for savings.
Potential savings: Discounts of 5% to 20% are available. The average driver receiving a 20% discount could save $545 per year.
Availability: DriveMyWay is currently only available in Utah. American Family has another telematics-based insurance program called KnowMyDrive, which is more widely available.
May be good for: Drivers who want to try telematics insurance without committing.
Erie YourTurn
Erie’s YourTurn program aims to gamify safe driving. The YourTurn mobile app monitors driving habits and offers feedback for improvement. Rather than offer a discount to drivers who sign up for YourTurn, the app assigns scores to drivers, like a game. And, like a game, you can compare scores with family members, try to get onto leaderboards, and watch your trends.
Based on your scores, you could earn rewards every two weeks. You can redeem these rewards for electronic gift cards or donate them to charity. Unlike other insurers' telematics programs, Erie doesn’t use the YourTurn app data to determine your premiums.
Potential savings: Users can earn high driving scores by driving safely. High scores earn you money that you can redeem as electronic gift cards from 25 different vendors or donate to charity.
Availability: Among the 12 states and Washington, D.C., where Erie is available, YourTurn is not available in Washington, D.C., Kentucky, North Carolina, or New York.
May be good for: Drivers who like gamification as a motivator.
GEICO DriveEasy
GEICO DriveEasy is a mobile-app-based telematics insurance program that offers potential discounts for your driving behavior — although higher-risk drivers may see rate increases based on their DriveEasy telematics data.
This program is especially concerned about how active smartphone use causes distracted driving. Activities like making or taking handheld phone calls or touching the screen to unlock your phone or access GPS logs in DriveEasy as distracted driving. Additionally, the app can’t differentiate between the driver using the phone and the driver passing the phone to a passenger to use the phone safely.
In most cases, this program requires every covered member of policy to use the app, and the app provides regular family report cards about driving behavior. This makes DriveEasy a great option for parents of teenagers who want to be sure their newly licensed drivers have limited distractions behind the wheel.
Potential savings: Savings will vary depending on driving behavior.
Availability: DriveEasy isn’t available in Alaska, California, Delaware, Hawaii, Kansas, Maine, Massachusetts, Mississippi, Montana, New Hampshire, North Dakota, Rhode Island, South Dakota, Vermont, or Wyoming.
May be good for: Parents of teen drivers.
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How much can telematics-based car insurance save you?
The amount of money telematics-based car insurance can save you depends on a number of factors, including:
Your driver profile
Your driving history
Your location
What kind of car you drive
Which program you sign up for
How much you already pay
Generally, a telematics car insurance discount is expressed as a percentage off your premium. While the exact percentage can vary, the amount will usually fall between a low of 5% and a high of about 30%.
Telematics car insurance FAQs
Telematics makes it possible for insurers to provide policies that are based on actual driving behavior. This is good news for safe drivers — and this innovation may also help make roads safer in general. But telematics monitoring does have some troubling implications about privacy and data security that may make some drivers uncomfortable.
How common is telematics-based car insurance?
Though the majority of insurance customers still don’t use telematics car insurance, its usage is growing rapidly. J.D. Power reported in 2021 that 16% of customers were already using telematics-based insurance, which was double the number using this innovation as of 2016, and another 34% stated they were willing to try it.
Where can you put a telematics device?
Plug-in telematics devices are usually designed to plug into your vehicle’s onboard diagnostic port (OBD-II port), located below the steering wheel in most cars. Some insurers offer a telematics mobile app instead, which uses your smartphone to collect driving data. Drivers with a telematics mobile app can mount their phone on the dashboard or simply carry it in their pocket or bag while driving.
Can you opt out of telematics-based car insurance?
Yes. Traditional insurance companies that offer telematics car insurance programs have kept these programs entirely optional. Customers can decide if they want to use a telematics device, and they can decide to stop using the device. Some insurers are solely telematics car insurance companies, but any traditional insurer can offer telematics as an opt-in program.
Can you use telematics-based car insurance with multiple drivers?
Yes. Multiple drivers on the same insurance policy can use telematics-based car insurance to help lower their premiums. In fact, some insurers require all drivers on a policy to use a telematics device — often a mobile app — to collect the entire household’s driving behavior. Insurance companies have several systems in place to ensure the telematics data is assigned to the correct driver.
What data does telematics-based car insurance collect?
Telematics devices generally collect the following information, according to the NAIC:
Mileage
Time of day
Location
Rapid acceleration
Hard braking
Hard cornering
Airbag deployment
Additionally, some insurance companies using mobile apps to collect telematics data will also gather data on instances of active phone usage while the car is in motion.
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Sources
- NAIC. "Telematics/Usage-Based Insurance."
- III. "What determines the price of an auto insurance policy?."
- Cambridge Mobile Telematics. "Telematics in Auto Insurance."
- U.S. General Services Administration. "Telematics."
- Research and Markets. "Passenger Car Telematics: Global Market for Services and Solutions."
- Insurance & Mobility Solutions. "What is a Telematics Device?."
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Emily Guy Birken
Emily Guy Birken is a former educator, lifelong money nerd, and a Plutus Award-winning freelance writer who specializes in the scientific research behind irrational money behaviors. Her background in education allows her to make complex financial topics relatable and easily understood by the layperson.
Her work has appeared on The Huffington Post, Business Insider, Kiplinger's, MSN Money, and The Washington Post online.
She is the author of several books, including The 5 Years Before You Retire, End Financial Stress Now, and the brand new book Stacked: Your Super Serious Guide to Modern Money Management, written with Joe Saul-Sehy.
Emily lives in Milwaukee with her family.
Courtney MikulskiSenior Editor, Auto
3+ years producing insurance and personal finance content
Main architect of the Insurify Quality Score
Courtney’s deep personal finance knowledge extends beyond insurance to credit cards, consumer lending, and banking. She thrives on creating actionable content.
Featured in
Corporate communications director for Insurance Information Institute
20+ years in insurance and communications
As Director, Corporate Communications for Triple-I, Mark serves as the non-profit’s national spokesperson, sharing information and education on a wide array of insurance issues.