Rising Demand for Usage-Based Car Insurance for Smart Financial Planning

BENGALURU, IN / ACCESS Newswire / June 16, 2025 / Car insurance in India is undergoing a significant shift, driven by evolving consumer expectations and the need for more personalised financial solutions. One of the standout trends is the rising demand for usage-based car insurance.

As insurers adopt telematics-driven models like pay-how-you-drive, policyholders are increasingly exploring plans that align premiums with actual driving behaviour. This approach reflects a broader movement towards cost-efficiency, responsible driving, and data-backed financial planning.

This blog will inform you about what usage-based car insurance is and also analyse why its demand is increasing.

Also, if you want to know more about car insurance, do visit ACKO Insurance.

What is Usage-Based Car Insurance?

UBI, or usage-based insurance, is a way of designing a car insurance plan. It bases your premium on how you drive and how much you drive. Its way of setting a premium for an insurance plan is very different from traditional motor insurance, as it does not follow a fixed rate.

Here, insurers analyse data such as your speed, braking patterns, etc. to come to a premium amount. UBI also rewards safe and responsible drivers. Therefore, if a person drives less or drives more cautiously, they get to enjoy lower premiums.

How Does Usage-Based Car Insurance Work?

UBI works by tracking the insurance holder's driving habits using telematics technology. Telematics technology is a branch of information technology which helps insurers collect real-time data. This helps them in personalising the insurance plan.

Firstly, the insurers build your risk profile. Then they offer lower premiums to those who drive safely. So the primary step is collecting the data, which helps the insurers derive your driving information.

There are different ways through which insurance providers can monitor and collect data. They are as follows:

1. Telematics Device: Insurers give you a telematics device to install in your car, which records all your driving behaviour.

2. On-Board Diagnostics (OBD) Sensors: You can plug these sensors into your car's OBD port. They track and share real-time driving data.

3. Plug-In Device: These are small devices, like a pen drive, which you can plug into your car, and they collect essential driving information.

4. GPS Device: Advanced GPS units can also gather and share data related to your driving speed, routes, and habits.

5. Mobile App: Some insurers use mobile apps as telematics tools. Here, you just need to install the app on your smartphone, which then tracks your driving. It tends to be less reliable, especially during claims.

Rising Demand: Benefits of Usage-Based Car Insurance

The rising demand for usage-based car insurance is due to its several benefits. These benefits are as follows:

1. Rewards for Safe and Responsible Driving

   Since insurers analyse drivers' driving data, they tend to offer them lower premiums based on their driving habits. These habits can include patterns of following traffic rules and more.

2. Helps You Improve Your Driving Habits

   The monitoring of your driving habits makes you aware of them. This helps you in correcting your mistakes and driving more responsibly.

3. Saves Money for Infrequent Drivers

   If a person does not drive often, UBI charges them less than the standard policies. This reduces the insurance expenses significantly.

4. Enables Better Road Safety

   Telematics also promotes a culture of safer roads. This happens as it encourages safe driving among users.

5. Supports Faster and Fairer Claims

   Accurate driving data helps insurers verify incidents faster and more accurately. This not only helps in speeding up claim approvals but also makes the process more transparent.

6. Improves Theft Recovery Chances

   Insurers can use real-time tracking to help locate and recover stolen vehicles quickly. This offers added peace of mind for the policyholders.

7. Customises Policies to Individual Needs

   Insurers can also personalise the coverage plans for their customers with reliable data. These plans add to the customer's convenience as they suit their driving habits and car usage.

8. Increases Customer Satisfaction and Retention

   Lastly, fair pricing, transparency, and tailored premiums make customers feel valued. This boosts their trust and long-term loyalty toward insurers.

Difference Between Usage-based Motor Insurance and Conventional Motor Insurance

There is a significant difference between usage-based motor insurance and conventional motor insurance. Understanding these differences can also help in analysing the rising demand for UBI.

The table below presents some primary differences in these insurances:

Bottom Line

As vehicles get smarter, it is only natural that your insurance follows suit. Usage-based car insurance is a practical, tech-driven response to integrate more fairness and modern mobility needs.

With more insurers offering personalised plans, customers can now enjoy coverage that truly matches their lifestyle. This is the future of motor insurance, which is not just digital but also deeply customer-centric.

Contact Details:

Website: https://www.acko.com/
Email: hello@acko.com

SOURCE: Acko