Usage-Based Insurance (UBI) links premiums to driving behaviour and mileage, promoting fairness, safety, and digital innovation in India’s evolving motor insurance landscape.
02 Nov 2025 | 3513 Views | By Pooja Yadav, Zuno General Insurance
The experience of looking at your insurance premium and thinking, "My premium costs the same as before, although I rarely drive," is one many modern drivers can relate to. With hybrid work arrangements, reduced road travel, and increased interest in careful journey planning, driving habits are evolving rapidly.
Yet, ...
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The experience of looking at your insurance premium and thinking, "My premium costs the same as before, although I rarely drive," is one many modern drivers can relate to. With hybrid work arrangements, reduced road travel, and increased interest in careful journey planning, driving habits are evolving rapidly.
Yet, insurance pricing hasn’t quite kept up. This is where Usage-Based Insurance (UBI) offers a smart, timely solution, providing not just intelligent protection but also fairer pricing based on actual driving behaviour.
What Is UBI?
Under the Usage-Based Insurance (UBI) system, your premium depends on how much and how well you drive, instead of traditional factors like vehicle age, location, or residence.
There are two broad types:
Insurers use the created driver profile scores and Telematics data gathered through smartphone applications, plug-in devices, and built-in vehicle sensors to determine individual premium rates. The benefit of adopting UBI is that the system operates without constant surveillance, as it exists to provide both fairness and accountability, which is the current demand.
Why UBI Makes Sense Right Now
Two drivers with identical vehicles and living in the same urban area should not receive equal premium rates when one frequently drives aggressively, while the other barely drives even during weekends.
UBI flips the conventional model, offering lower premiums to drivers who have reduced mileage and demonstrate safe driving habits. By tying cost behaviour, it allows users to gain better control over their insurance spending. In an age where digital-first users value transparency, from food delivery apps to investment apps, UBI appears to be a great fit.
UBI vs Regular Insurance
Choosing between UBI and Traditional Insurance Cover boils down to individual driving habits. Where traditional motor insurance is a one size fits all model, with fixed premiums based on broad risk factors. It offers predictability and peace of mind who is ideal for daily drivers who values stability over flexibility.
On the other hand, UBI works best for those who drive less or drive smart. Hybrid workers, non-daily commuters and weekend drivers benefits the most from flexible pricing that rewards low mileage and safe habits. It’s a clear case of getting out what you put in, drawing a direct proportion between how you drive and what you pay, which leverages meaningful savings.
Although, regular insurance remains beneficial for customers who dislike data-sharing or want to maintain fixed insurance premiums.
What position does India hold in this development process?
We’re getting there. Slowly but surely.
Global UBI Trends
Usage-based insurance (UBI) is picking up speed globally, with the market projected to surge from $26.8 billion in 2022 to over $267 billion by 2032, according to Allied Market Research. The U.S. and U.K. are ahead of the curve, rolling out pay-how-you-drive (PHYD) models at scale—fuelled by a generation of digital natives willing to trade driving data for lower premiums.
So, What’s the Catch?
The positive aspects of UBI do not erase its existing obstacles.
These challenges have identifiable solutions. Insurance coverage would improve significantly through clear opt-ins together with user-friendly applications and enhanced communication practices.
The Road Ahead
UBI is more than a tweak to traditional insurance—it's a mindset shift the industry has long put on the back burner. By aligning premiums with real-world driving behaviour, insurers can price policies more accurately and, in turn, build lasting trust with their customers.
For consumers, it’s a move away from being just another policy number. UBI recognises people as individuals—with unique habits, routines, and choices—offering personalised attention in a space that’s often felt impersonal.
As our roads get smarter, insurance providers can no longer afford to stay in the slow lane. Embracing technology isn’t just a competitive edge—it’s fast becoming a necessity.
Pooja Yadav is the Chief Product Officer at Zuno General Insurance. Views expressed are the author's personal.