Do cost/rewards and accessibility

to devices make a difference?

Insurers can now use telematics technology to capture minute-by-minute

driver behavior and health data, enabling them to assess risk more precisely than ever before.

By Lisa A. Gardner, Ph.D., CPCU, AIC, AIDA, API

Usage-based insurance (UBI) programs use telematics—a blend of telecommunications and informatics—to track behavior in real time. Low-risk behaviors should lower coverage costs, while risky behaviors should, in theory, raise them.

Usage-based insurance is a 21st-century trend enabled by new technologies, with most attention paid to auto insurance applications (see, for example, the 2021 article “Want Your Auto Insurer to Track Your Driving? Understanding Usage-Based Insurance” by the National Association of Insurance Commissioners). Also called telematics insurance, usage-based auto insurance uses cellphone apps or plug-in devices to monitor driver behavior in real time.

According to the NAIC article, behaviors tracked include braking, location, mileage, and time. Driver behavior data is sent to insurers instantly, enabling them to use it in setting premiums. Insurers may offer discounts for good driving or raise premiums for poor behavior.

Insurers have long gathered driver behavior data through records and disclosures. The key change is real-time tracking of risky (e.g., speeding) or safe (e.g., not using a cellphone while driving) behaviors without law enforcement. Mileage can also be tracked without driver input. The driver sacrifices some privacy, particularly about their location, as they are tracked.

Usage-based auto insurance is growing in popularity as drivers seek lower costs. About 17% of drivers use UBI policies, more than double the rate from a decade ago, according to a 2024 J.D. Power & Associates article, which also states that those insureds with auto UBI report higher satisfaction with their coverage and that the potential for reduced premiums and increased satisfaction may lead to broader adoption.

Most of the most prominent auto insurance writers offer UBI, but not to all drivers. Some insurers, like Root Insurance, only offer usage-based auto insurance.

Like usage-based auto insurance, usage-based health insurance (UBHI) relies on telematics for risk evaluation. Health insurers gather data from fitness wearables to track health-related activities, such as daily steps and sleep patterns. Healthy habits can qualify individuals for financial incentives, reducing their insurance costs.

While UBHI seems promising, it has not attracted the same attention as UBI for autos. This difference can be explained, in part, by variations in cost versus rewards and accessibility between the two types of insurance.

Cost outlays vs. financial rewards

Usage-based insurance’s cost-benefit balance differs for auto versus health insurance. Auto insurers usually provide apps and plug-in devices free of charge. Most Americans—about 98%—already have a cellphone, according to 2024 data from the Pew Research Center, and do not need to buy one for UBI. Thus, most pay nothing extra to enroll.

Some auto insurers offer discounts simply for opting in to UBI. Subsequent savings from UBI auto discounts vary and can be as high as 40%, according to a 2025 Forbes article. So for someone paying the estimated national average premium of $1,708 for private passenger auto insurance, the savings could be as high as $683 annually. This is in addition to any UBI enrollment discount. Savings for commercial auto insurance can be even higher because the average premium is higher. Over time, these savings add up.

Not all drivers can enroll in UBI, and premiums may increase for below-average drivers. UBI app feedback can improve habits and reduce accident risk, boosting discount eligibility and benefiting insurers through fewer claims.

Usage-based health insurance uses wearables like Apple Watch, Fitbit Charge 6, or Garmin Vivoactive 5 to monitor health metrics/behaviors, such as heart rate, activity, and sleep. These devices usually sync with cellphone apps, which forward data to third parties like employers or insurers.

Collecting and sending data requires both a fitness tracker and a cellphone. While nearly all U.S. adults have cellphones, only about 21% have fitness trackers—a figure expected to rise to 26.83% by 2030, according to a 2025 Statista article. This limits UBHI’s reach.

Most fitness tracker owners already exercise and have better health, according to a 2022 article from Harvard Health Publishing, so UBHI rewards tend not to change their behavior. Less active people may see health gains by using fitness trackers to pursue goals, the article states.

Yet health improvements alone may not motivate participation in UBHI. Financial incentives may be needed, especially if a tracker must be bought. Still, many will not adopt healthier habits despite rewards.

Fitness tracker costs, typically $50 to $400, can deter UBHI adoption. While some insurers offer subsidies and rewards for meeting fitness goals, these benefits are not universal. Without subsidies and broad access, the additional costs are likely to cause many to skip UBHI participation, limiting its financial benefit.

Different access

Private companies write nearly all U.S. auto insurance. States regulate rate setting, premiums, and discounts. Every state allows UBI, usually as a way to offer premium discounts, which can make coverage more affordable for those required to purchase it. Private auto insurance companies determine access to UBI.

Access to usage-based health insurance partly depends on whether coverage is public (e.g., CHIP, Medicaid, Medicare) or private. Public plans insure about 129.5 million people (35.8% of the U.S. civilian population), according to data from the 2025 National Health Interview Survey. Except for some Medicare Advantage plans, public insurance generally does not offer UBHI, according to a 2025 article published by KFF, an independent source for health policy research, polling, and news.

Usage-based health insurance can be offered as part of a private health insurance plan. Private health insurance covers 56.4% of the U.S. civilian population, or 204.2 million persons, according to the National Health Interview Survey.

The KFF article states that over 90% of these 204.2 million are covered by employer-sponsored health insurance, where negotiations between the employer and the health insurer determine access to usage-based health insurance. Growth in usage-based insurance seems most likely to occur in the group health insurance market, where the employer benefits from a healthier workforce.

Employers may reward healthy habits through fitness trackers in wellness programs, but not as a part of their health insurance plans. This encourages healthier habits among employees, which most would agree is a good thing. Healthier employees typically have lower absenteeism, higher productivity, and less turnover, all of which benefit employers.

Employers do not need to offer UBHI for employees to use fitness trackers to improve health and receive rewards. They can still provide health insurance separate from any fitness tracker usage. When this occurs, the insurer still benefits from lower claims from a healthier group of insureds. However, they lose access to individual data about health habits, which can affect their data-driven strategies.

Individuals without employer-sponsored health insurance can still seek coverage through private insurers. About 14.8 million people without employer insurance have exchange-based private coverage, according to the National Health Interview Survey. These plans must meet the 2010 Affordable Care Act coverage minimums. Usage-based health insurance is not an available option.

Conclusion

Insurers can now use telematics technology to capture minute-by-minute driver behavior and health data, enabling them to assess risk more precisely than ever before. These recent advancements allow telematics to support both usage-based auto and health insurance. However, realizing the best outcomes for both parties requires consistent, long-term effort in maintaining good habits.

While promising, not all drivers qualify for usage-based auto insurance. Among those who are eligible, enrollment can lead to reduced premiums and greater satisfaction with their auto insurance; these benefits may help drive wider adoption, according to the J.D. Power article. Still, adoption may be limited by concerns about privacy, data security, and adapting to new technology.

Turning to health insurance, UBHI eligibility is also limited. Employers and insurers negotiate restrictions, and state and federal laws impose more on public programs. Some employer-sponsored health plans offer UBHI, but state exchanges do not. Certain Medicare Advantage plans allow UBHI; other public insurance excludes it.

UBHI’s cost-benefit balance is limited by device ownership. While employer support may help, most adults do not own a fitness tracker and may not justify the added cost for potential insurance rewards. This financial barrier restricts UBHI’s reach and effectiveness.

Even among adults who own fitness trackers, most did not buy them for insurance discounts. These devices help guide personal exercise goals—like training for a race, reaching a fitness milestone, or managing conditions like diabetes. Achieving fitness goals does not necessarily require having them tied to health insurance plan rewards.

Expanded use of tracking brings additional concerns. Information from a tracker may reveal a health problem. An employer could potentially and unethically use this data to justify terminating an employee based on perceived risk.

Suppose the Affordable Care Act’s ban on using pre-existing conditions in health underwriting is repealed. In that case, health insurers may use fitness tracker data showing health issues as grounds to decline an applicant. This declination could lead to loss of insurance coverage for those with identified problems.

Usage-based health insurance provides a way for those covered under certain employer-sponsored health insurance plans to reduce their costs by sharing data about health habits.

For many reasons, it does not have the same appeal or attract the same attention as auto UBI. Nonetheless, it may motivate some less active people to become more active, benefiting their health and quality of life.

The author

Dr. Lisa Gardner is the associate director, Content and Research, at the Risk & Insurance Education Alliance. Her experience includes more than three decades as a professor in higher education where she taught courses about risk management and insurance, statistics, and finance, and provided programmatic leadership.