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usage-based insurance (UBI)

Usage-based insurance is a type of auto insurance that tracks driving behavior via (a) devices installed in a vehicle or (b) a smartphone.

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Also known as telematics, this process uses wireless devices to transmit driving data (e.g., speed, distance traveled, time of day traveled) in real time back to the insurer. The cost of such insurance dynamically varies with a change in risk. The result is a better alignment of insurance premium with actual risk.