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 or already integrated in original equipment installed by car manufactures. The basic idea of telematics auto insurance is that a driver's behavior is monitored directly while the person drives. http://www.intellimec.com/usage-based-insurance-trends/
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 etc. The level of data collected generally reflects the telematics technology employed and the policyholders’ willingness to share personal data. The insurance company then assesses the data and charges insurance premiums accordingly.