Usage-Based Insurance (UBI)

Driving behaviour insurance, commonly known as UBI motor insurance (Usage-Based Insurance), is an innovative motor insurance model that collects real-time driving data via telematics technology to enable personalised, "one vehicle, one rate" dynamic pricing.

💡 Core Principles

The underwriting logic of UBI is straightforward: your premium is determined by "how you drive", not "who you are". Utilising OBD devices, smartphones, or factory-fitted vehicle sensors, it captures driving data such as hard acceleration, sudden braking, mileage, driving hours, and travel routes, applying algorithmic models to assess risk profiles and calculate dynamic premiums.

The main advantage is that motorists who drive less and practice safe driving enjoy lower premiums and fairer pricing. At the same time, it incentivises better driving habits and helps reduce road accident rates. According to industry research, the global UBI market is projected to expand from USD 43.4 billion in 2023 to USD 70.5 billion by 2030.

📍 Developments and Challenges in China

In China, regulatory policies have paved the way for UBI products. In 2020, the former China Banking and Insurance Regulatory Commission (CBIRC) initiated plans to explore innovative products like UBI. By 2025, a joint directive issued by four government agencies to boost the high-quality development of New Energy Vehicle (NEV) insurance created further opportunities for UBI deployment.

Nonetheless, the widespread rollout of UBI in China continues to face several roadblocks:

Data Silos: Core vehicle telematics data is held exclusively by carmakers as proprietary trade secrets. Without a unified industry data-sharing framework, insurers struggle to access critical driving data.
Cost and Standardization: The adoption rate of factory-fitted hardware remains low, aftermarket OBD installations are costly to deploy, and standardized data interfaces are currently lacking.
Profitability Pressures: Several NEV insurance portfolios are currently operating at underwriting losses, making accurate risk pricing under limited data availability a major challenge.

⚖️ Privacy Concerns and Global Practices

The biggest hurdle for UBI remains data privacy. GPS tracking can easily reveal residential and workplace locations, while late-night driving logs can expose personal routines. Drivers must weigh the trade-off between sharing their personal data and securing premium discounts.

Globally, UBI models are primarily split into two categories: Pay-As-You-Drive (PAYD) and Pay-How-You-Drive (PHYD) — the former focuses purely on mileage, while the latter assesses actual driving behaviour. In Hong Kong, taxi fleets have already piloted UBI schemes that adjust premiums dynamically via AI-driven driver safety scores. In Taiwan, insurers provide fleet risk management solutions for commercial logistics operators, successfully slashing accident cases from 32 down to 16.

💎 Summary

Usage-Based Insurance (UBI) marks the transition of motor insurance from traditional "static pricing" to "dynamic, personalised pricing". While it encourages safer driving and delivers fairer rates, its growth in China remains constrained by data-sharing barriers and regulatory hurdles.

If you are considering a UBI policy, it pays to honestly evaluate your own driving habits first and look closely into what specific data is collected and how it will be processed. It may not be for every motorist, but it serves as an effective incentive for those looking to kick bad driving habits.