National Association of Insurance Commissioners: “Usage-Based Insurance (UBI) is a recent innovation by auto insurers that more closely aligns driving behaviors with premium rates for auto insurance. Mileage and driving behaviors are tracked using odometer readings or in-vehicle telecommunication devices (telematics) that are usually self-installed into a special vehicle port. The basic idea of telematic auto insurance is that a driver’s behavior is monitored directly while the person drives. These telematics devices measure a number of elements of interest to underwriters: miles driven; time of day; where the vehicle is driven (GPS); rapid acceleration; hard breaking; hard cornering; and air bag deployment. The insurance company then assesses the data and charges insurance premiums accordingly. For example, a driver who drives long distance at high speed will be charged a higher rate than a driver who drives short distances at slower speeds. With UBI, premiums are collected using a variety of methods, including utilizing the gas pump, debit accounts, direct billing and smart card systems…

• UBI programs offer many advantages to insurers, consumers and society. Linking insurance premiums more closely to actual individual vehicle or fleet performance allows insurers to more accurately price premiums. This increases affordability for lower-risk drivers, many of whom are also lower-income drivers. It also gives consumers the ability to control their premium costs by incenting them to reduce miles driven and adopt safer driving habits. Fewer miles and safer driving also aid in reducing accidents, congestion, and vehicle emissions. 
• The practice of tracking mileage and behavior information in UBI programs has raised privacy concerns. As a result, some states have enacted legislation requiring disclosure of tracking practices and devices. Additionally, some insurers limit the data they collect. Although not for everyone, acceptance of information sharing is growing as more mainstream technology devices (such as smartphones, tablets, and GPS devices) and social media networks (such as Facebook and My Space) enter the market.”