Usage-Based Auto Insurance: Savings vs. Privacy

Is it worth sacrificing privacy to save on auto insurance?

A woman sits in her car and looks at her phone, which is mounted on the air vent to track her driving using telematics

Luis Alvarez / Getty Images

If you’re looking to save on auto insurance, you may be lured in by programs that promise to save you money if you agree to use a device or smartphone app that gathers data about your driving, like your mileage, speed, and location. This kind of data collection is called telematics and it’s associated with usage-based insurance (UBI). 

On the plus side, UBI is a way to improve your premium based on a factor that directly impacts your driving risk (your behavior) instead of factors unrelated to driving such as marital status and your credit score. But consumer and privacy advocates have raised questions about the telematics data gathered by insurers. Before you sign up for a UBI program, it’s important to understand what data is collected and how it’s used.

Here’s what to think about before you sign up for a UBI insurance program.

Usage-Based Insurance Savings

UBI relies on a device or app that gathers information for your insurance company about when, how, and where you drive. Nine out of the top 10 insurance companies in a 2020 study offer UBI programs. Insurers look for signs that you engage in risky driving behavior, such as:

  • Rapid braking and acceleration
  • High mileage 
  • High-risk driving times (such as late at night) 
  • Distracted driving
  • Idle time
  • Speeding

After considering these factors, insurers offer you feedback on your driving and may assign you a score. The score isn’t like a FICO score—it’s only used by that individual insurer, who may use the score to suggest specific areas of improvement and to calculate a discount. 


While drivers can see savings by using UBI, it can also increase the profitability of insurers and prevent accidents.

Some auto insurers specify that their UBI programs only offer discounts—your rate won’t increase based on your driving habits. However, it’s crucial to read the fine print, because other insurers may increase your rates based on your behavior or mileage.


Insurance providers may also offer pay-per-mile insurance programs, in which premiums are based on how many miles you drive daily. However, even those programs may analyze driving events like sudden braking. 

How Telematics Devices Work

Different UBI programs use a range of telematics devices, which may include:

  • A device you plug into your car
  • An app you download onto your phone
  • An OnStar connection in your vehicle
  • A device or app paired with an in-car Bluetooth beacon 

Most telematics devices use an underlying platform or operating system that automatically gathers data and analyzes it for the higher-risk behaviors explained above. While some insurers offer vague website disclosures about what data is gathered, others are quite transparent. For example, Progressive’s website states that for its Snapshot program: 

  • The device collects information such as your vehicle’s speed, G-force, and location using GPS. It also notes the time of day, the Vehicle Identification Number (VIN), and whether you’ve unplugged the device.
  • The app collects your GPS location, time information, and other data from the phone’s sensors, such as its magnetometer, gyroscope, barometer, proximity sensor (which can tell whether a user is holding the phone to their face), and accelerometer. It also records some mobile phone information and analyzes how you use the app.

Telematics: Reducing Bias in Insurance Premiums?

Premiums that take into account telematic information may be more precise and individualized, which could help lessen the impact of non-driving factors, such as age, gender, or credit scores. 

“We should be judged on how we drive, not who we are,” said Doug Heller, insurance expert at Consumer Federation of America. “If we're demonstrably bad drivers, we should pay more.” Capturing data clearly relevant to driving safety could give insurers a more accurate sense of our risk while providing feedback to drivers to improve on-the-road choices, he noted. 

Hari Balakrishnan is the founder and CTO at Cambridge Mobile Telematics, which provides the underlying platform for insurance telematics apps for companies such as State Farm, Nationwide, and Liberty Mutual. When he added his teen daughter to his policy, his premium tripled—insurance companies often consider teens to be higher-risk drivers. However, his insurance provider’s feedback and scoring have proven his daughter to be a safer-than-average driver, earning him a reduced premium and gift card rewards. 

“Using the app has been extremely empowering for her and helped her focus on being a better driver,” Balakrishnan said. “When my score drops below hers, she lets me know.”


Find out if a usage-based insurance app might help or hurt your premium with the DriveCheck UBI Calculator offered by the National Association of Insurance Commissioners.

Data Safety and Security

Insurers typically say they won’t sell your data. But the fine print might specify that they may share your data when required by law—for example, when resolving insurance claims, or responding to a police request or a civil lawsuit subpoena (which could include divorce or custody cases). Some insurers point out that they may share data with third parties, including affiliates, for marketing purposes, though you may be able to opt out. 

Consumer advocates and privacy experts have expressed concerns about the data collected by devices and apps. “The insurance industry doesn't get a free pass, and shouldn't be allowed to say ‘trust us, we're going to monitor your cell phone and vehicle, and we promise to use the data right.’” Heller, of the Consumer Federation of America, said.

Location data is of particular concern for privacy advocates, since it marks the route to, say, your kid’s school—as well as to the STI clinic, legal cannabis shop, or divorce attorney. “Location data is incredibly revealing,” said Lee Tien, legislative director at the Electronic Freedom Foundation, a nonprofit focused on civil liberties in the digital age. “You may not be walking around telling everybody you had cancer, you had a miscarriage, or you’re three months pregnant, but it’s inferable from location data.” 

That data is of high value. “There’s an information economy out there that buys and sells data about you,” Tien pointed out. It’s possible for any app to sell your location data to third parties, who can target you with advertisements if you’re found within a designated area (this is called “geofencing”). 

“When we allow insurers to use our driving data, it should only be for rating purposes, and they should be prohibited from sharing or selling that data,” Heller said. Earning the trust of the public requires an insurer’s willingness to be fully transparent, with a commitment to policyholder privacy, he noted. 


In response to these worries, some states have passed or are considering legislation that restricts how telematics data can be used. For example, California bans all telematics data except mileage. But for the most part, consumers are on their own to decide whether to share location and driving behavior data with insurers. 

So when considering usage-based insurance, you’ll need to investigate your insurer’s approach to your data. It’s OK to ask, “‘What is going to be done with my data and who has it?’” explained Balakrishnan. In his opinion, insurers should use data only to evaluate driving quality and pricing, along with servicing claims. “Whatever those services are should be made clear to users,” he said. 

Most insurers currently use telematics data to provide better, more accurate auto insurance rates, explained Balakrishnan. “The insurance partners we work with do not want to do nefarious things with the data,” he said. If some insurers made their programs simpler to understand, “people would no longer have to assume the worst.” 


What about your data’s safety? Tien said there are “best practices” where security is concerned, but no security standard could cover all the settings in which a company might use the data (even if the data is encrypted).

Questions to Ask Your Insurer

You might be able to find privacy-related disclosures on insurance company websites. However, the terms and conditions may be vague and difficult to understand. Plus, each insurer’s program operates a bit differently. 

Before signing up for a UBI program, ask your agent about the policy and telematics device. Understand what data is gathered, how it’s stored, and who owns it. Here are some questions you might ask:  

  • What data do you collect from my phone or car? What is the data used for? Can you use my data for other purposes in the future?
  • Can I delete or contest data or trips you’ve collected or used in scoring me? 
  • With whom do you share my driving data, routinely or by request? Can I opt out of any sharing or third-party marketing?
  • What happens to my data if I stop being your customer?
  • Could my rates go up as a result of my driving habits?
  • Do I have an opportunity to improve my score?

You may be able to find the answers in the terms and conditions for the insurer’s program. However, when terms and conditions go through the legal-review sieve to protect the business’s interests—or because policies vary due to state regulations—the end-user agreement could wind up both more complicated and vague than necessary. 

“As with so many businesses, we need an overhaul of the terms and conditions documents we are asked to sign, because nowadays they’re too convoluted and complicated to be meaningful to the average consumer,” Heller said. “I would like to see much higher standards for clarity required of insurance companies whether it’s for offering a telematics product or describing policy exclusions.”

Is UBI Worth the Trade-Off?

Even if your telematics data isn’t sold or stolen, you still need to decide if you’re OK with having your insurance company monitor your driving habits. The privacy tradeoff may be worth it if you’re currently being charged high rates, but you know you’re a super-safe driver in terms of the variables that are measured by telematics devices and apps. UBI may also be a good fit if you'd enjoy getting feedback to improve your driving skills, or if you're the parent of a new driver and would like to monitor their choices. 

But the privacy-related answers your insurer provides—and the transparency accompanying those answers—may also influence your decision about whether to sign up for a telematics or usage-based insurance program. Some people will never feel comfortable having their driving behavior tracked—even with assurances that their data won’t be sold—and receiving nudges to change it. “Many people don’t want an insurer riding shotgun with them,” Heller said. Only you can decide whether that’s something you could get used to in hopes of saving money.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Insurance Information Institute. "Background on: Pay-as-You-Drive Auto Insurance (Telematics)."

  2. Progressive. "Snapshot® Privacy Statement."

  3. National Association of Insurance Commissioners and The Center for Insurance Policy and Research. "Usage-Based Insurance and Vehicle Telematics: Insurance Market and Regulatory Implications," Page 73.

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