In early 2016, we wrote about telematics, or usage based insurance (UBI), and its effects on the insurance industry. In 2019, the UBI market reached an estimated $24 billion, and projections are that the market will grow to $125.7 billion by 2027.

Usage-based insurance can also be referred to as Pay-As-You-Drive (PAYD), Pay-How-You-Drive (PHYD), Pay-As-You-Go, and Distance-Based Insurance. All of these terms refer to telematics. A telematics device — also called a black box or a dongle — is a small device that plugs into a vehicle's diagnostic port, or it may be integrated into the vehicle itself, to track the mileage and monitor the driver's behavior. A SIM card and modem in the device enables telecommunication of this information via a cellular network.

Telematics devices are able to measure a number of elements of interest to underwriters, including miles driven, time of day driven, where the vehicle is driven (Global Positioning System or GPS), rapid acceleration, hard braking, sharp cornering, and airbag deployment. The level of data collected generally reflects the type of telematics technology in use and the driver's willingness to share personal data. The basic idea of UBI is that a driver's behavior is monitored directly while the person drives, allowing insurers to more closely align driving behaviors with premium rates.