Usage-based insurance (UBI), also known as pay as you drive (PAYD) and pay how you drive (PHYD) and mile-based auto insurance, is an increasingly common ask of the carriers of vehicle insurance. The costs of UBI are dependent upon the type of vehicle used, measured against time, distance, behavior and place. A UBI Policy has a base premium component that is based on usual policy characteristics such as vehicle, drivers etc. In addition to the base premium, the customer is then billed on a periodic basis that is based on trips undertaken in the period. UBI has two components to it:

• Telematics Provider - records trip information in real-time that includes trip data such as start time, end time, distance driven etc. each time a vehicle is driven
• Insurer - The carrier then uses the trip information and calculates a price that needs to be charged to the insured. The calculation of charges are performed on a monthly basis.