Usage-based insurance (UBI) has become an established part of the motor insurance market in several countries, particularly Italy, the UK and the US. By linking premiums more closely to how, where and how much a vehicle is driven, UBI gives insurers access to information that traditional insurance models cannot capture and provides drivers with the potential to influence their insurance costs through their driving behaviour.
This blog draws on our recent report on ‘Usage-Based Insurance: New business models and rising premiums driving a 187 million device industry by 2035’, exploring how the underlying technology and data sources supporting usage-based insurance are evolving. In particular, it examines the shift from traditional aftermarket telematics towards OEM-embedded vehicle data, and considers why smartphones, aftermarket devices and OEM connectivity are likely to coexist as the market develops.
For more than a decade, the technology underpinning UBI has largely been based on aftermarket telematics devices and, increasingly, smartphones. But the foundations of the market are beginning to change. The growing number of connected vehicles on the road means that insurers and their technology partners can obtain vehicle and driving data directly from embedded OEM telematics systems. This does not mean that OEM data will simply replace black boxes, OBD devices or smartphone-based telematics. Instead, UBI is moving towards a more diverse data environment in which insurers can select, combine and analyse different sources according to the vehicle, customer segment, use case and economics.
Traditional motor insurance pricing relies heavily on factors such as age, location, claims history and other characteristics that provide an indication of risk. UBI introduces another dimension by incorporating actual vehicle and driving behaviour into the insurance proposition. Telematics can provide information about mileage, driving behaviour and vehicle usage, allowing insurers to develop more granular risk models and create products such as Pay How You Drive (PHYD) and Pay Per Mile insurance. The underlying concept is well established. What is changing is how insurers obtain the data.
Historically, the most common approach was to install an aftermarket device in the vehicle. Black boxes and OBD-II connected devices provided insurers with a relatively consistent way of collecting telematics data across different vehicle manufacturers. Smartphones subsequently expanded the addressable market. Smartphone-based telematics removed the need for dedicated hardware in many applications and made it possible to deploy UBI programmes at much larger scale. For insurers, the attraction was relatively straightforward: customers already owned the hardware required to collect much of the necessary behavioural data. However, smartphone-based telematics can present data-integrity challenges, as drivers may leave their phone behind or use a secondary device, prompting insurers to use additional data and detection techniques to verify journeys.
The connected vehicle is now introducing a third option.
As more vehicles leave the factory with embedded connectivity, the vehicle itself is becoming the source of telematics data. This removes some of the friction associated with traditional UBI deployment. There is no separate black box to install, no OBD device to distribute and potentially less hardware to manage throughout the life of a policy. The connectivity and sensors are already integrated into the vehicle. This shift is already becoming commercially relevant. IMS, for example, has integrated embedded sensor data from Volkswagen passenger vehicles into its platform so that the data can be converted into risk-based ‘Pay How You Drive’ scoring for insurers. Importantly, IMS positions OEM data as a complementary source to smartphone telematics rather than as an immediate replacement. OEM data could also verify smartphone telematics data by helping verify journeys, for example by identifying cases where the vehicle is moving but the expected smartphone data is absent. It expects the market to develop towards what it describes as a ‘mixed economy’, combining smartphone-derived behavioural information with selected OEM data points. This is significant because it highlights a fundamental change in the UBI proposition. Insurers are no longer necessarily asking, ‘Which telematics device should we put in the vehicle?’ They can increasingly ask, ‘Which available source provides the data we need at the right cost and quality?’
The implications extend beyond insurers and telematics providers. Automotive OEMs increasingly control the connectivity infrastructure through which vehicle data is generated and accessed. As a result, they are becoming important participants in the wider vehicle-data ecosystem. OCTO Telematics, for example, has established direct partnerships with automotive manufacturers to incorporate embedded vehicle data into its telematics and analytics platforms. In 2022, OCTO announced an agreement with Ford to use connected-vehicle data for insurance and analytical services in several European markets, including the UK, Italy, Germany, France and Spain. More recently, in March 2026, OCTO Telematics announced a partnership with Volkswagen Group Info Services to integrate vehicle data from Volkswagen, Volkswagen Commercial Vehicles, Škoda, SEAT, CUPRA and Audi into its fleet platform without additional hardware. OCTO has also partnered with Stellantis' Mobilisights, which provides access to embedded telematics data from 14 automotive brands. The partnership is intended to combine native vehicle data with OCTO's analytics and driving-behaviour modelling for use cases including insurance and fleet management.
These developments illustrate a broader trend: connected vehicles are turning OEMs into potential data suppliers to insurers, telematics companies and other third parties. For OEMs, this creates opportunities beyond selling vehicles. Embedded connectivity can support insurance, fleet management, claims, maintenance, mobility and other data-driven services. Insurance can therefore become another service layer that OEMs and their partners can build around the connected vehicle.
Despite the potential advantages, the transition to OEM-based UBI is unlikely to be immediate or universal. The first challenge is vehicle coverage. The connected-vehicle population is growing, but there remains a substantial installed base of older vehicles without embedded connectivity. Smartphone and aftermarket solutions therefore remain important for reaching these customers. There is also the question of data availability. An OEM may collect a large amount of vehicle data, but that does not mean all of it is automatically available to an insurer or telematics provider. Access depends on commercial agreements, technical integration, customer consent and the data made available by the manufacturer.
Data consistency can also be an issue. Different manufacturers have different approaches to vehicle data, meaning that an insurer working across multiple OEMs may face a fragmented data environment.
This is particularly important for commercial fleets.
For an individual driver, an embedded OEM solution can be highly attractive because it eliminates the need for an additional device. For a commercial fleet, however, the question is often more complicated. A fleet may contain vehicles from several manufacturers. A fleet operator may therefore prefer a single telematics platform that provides a consistent view of vehicles, drivers and safety performance rather than managing separate and fragmented data feeds from each OEM. This gives aftermarket telematics providers an enduring role. A good example is Nussbaum Trucking in the US. The company operates approximately 550 trucks and deployed Geotab telematics across its fleet. According to Geotab, Nussbaum subsequently achieved a USD300,000 reduction in annual automotive liability and physical damage insurance costs. The company used telematics data alongside driver coaching, safety management and collision reconstruction.
This example illustrates why aftermarket telematics can remain relevant even as OEM connectivity expands. The value is not simply in collecting vehicle data. It is also in providing a consistent platform through which that data can be analysed, integrated into fleet processes and presented to insurers. For mixed fleets, standardisation can therefore be as important as the underlying source of the data.
The growing availability of OEM data should therefore not be interpreted as the end of aftermarket telematics. Instead, the market is likely to become more heterogeneous. Smartphones will continue to provide an attractive way for insurers to launch mass-market programmes without relying on a particular vehicle manufacturer. Aftermarket devices will remain relevant for older vehicles, commercial fleets and situations where insurers require a standardised data source across different vehicle brands. OEM data, meanwhile, will become increasingly attractive as the connected-vehicle population expands. It can reduce hardware and installation requirements and provide access to vehicle-native data that may not be available through a smartphone.
The most effective approach may consequently depend on the specific application. For a new-car UBI proposition, OEM data could become increasingly attractive. For a mixed commercial fleet, an aftermarket platform may remain preferable. For a mass-market consumer programme, smartphones can continue to offer a low-friction route to deployment. The resulting market is less likely to be characterised by one technology replacing another and more likely to involve insurers and telematics providers combining multiple data sources.
This evolution changes the competitive dynamics of the UBI market. Historically, much of the technology proposition centred on the ability to install telematics hardware, collect data and turn it into a driving score. As vehicle connectivity becomes more widespread, access to the vehicle data becomes less of a differentiator. The focus is shifting towards what companies can do with the data. Telematics providers need to be able to ingest data from different sources, standardise it, combine it with claims and contextual information, and convert it into actionable insights for insurers. OEMs need to determine how and under what commercial models their vehicle data can be made available to third parties. Insurers, meanwhile, need to decide which sources provide the most useful data for their particular underwriting and pricing strategies.
This creates a new role for companies such as IMS and OCTO. Rather than simply providing a device through which vehicle data is collected, they can increasingly act as an intermediary between multiple data sources and the insurer. The result is a UBI market in which data access, interoperability and analytics become increasingly important alongside the underlying telematics technology.
