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What is Telematics? 

Telematics refers to a section of computing that is involved with the long-distance transfer of digital information. In the insurance industry, telematics refers to the digital monitoring and tracking of a vehicle’s travel route, mileage, engine health, and distance. In modern times, telematics has been implemented in a lot of cars and commercial vehicles to track their travelling patterns and distance. For instance, GPS devices are installed in commercial transport trucks for the purpose of logistics. Telematics in car insurance is when the insurance premiums are set based on the amount of distance a car travels. 

How Does Telematics in Car Insurance Work?

Telematics insurance which is also called ‘Usage-Based Insurance’ works on the simple principle that car owners would only pay insurance premiums that are proportional to the distance their car travels. In order to achieve this, insurance companies will install a telematics device on your (the policyholder's) car that will measure details like distance travelled, driving pattern, route travelled, etc. Instead of a telematics device, the insurance company may also use the car’s in-built GPS, or ask you to download a mobile app that will help track your car’s movements. Based on the information available from these sources, the insurer will set an insurance slab or rate for the policyholder. If you go above the distance mentioned in your insurance slab, you will have to manually recharge your insurance plan or upgrade to a plan with a higher distance limit. 

How Do You Report Driving with UBI?

In case you have chosen telematics in the car insurance policy for your car, you most likely won’t have to manually report your driving details to the insurance company. The insurance company can automatically get the information from the following sources: 

  • Smartphone App 

The insurance company may track your driving patterns from a smartphone application that’s installed on your phone at the time of buying the telematics in the car insurance plan. 

  • Plug-In Telematics Device 

The insurance company may install a plug-in telematics device in your car through which they can track information like distance and route travelled for telematics auto insurance. 

  • In-built GPS 

If your car has a sufficiently advanced GPS system, the insurance company can directly get the tracking information from your GPS device. 

  • Odometer 

The insurance company may also choose to keep track of the distance travelled by your car by keeping tabs on the odometer which is installed in your car for the telematics auto insurance. 

Benefits of Telematics Insurance 

Telematics motor insurance for cars has plenty of benefits for policyholders as well as insurers. Let’s take a look at some of them:


  • Primarily, this type of insurance helps car owners save money on insurance premiums, as they only have to pay insurance for the distance travelled by their cars. 
  • As the car owner’s driving habits are being tracked continuously, it encourages them to drive carefully and avoid rash stunts with their cars. 
  • Careful driving helps reduce the instances of accidents, which ultimately keeps the insurance premiums low for the policyholders. 
  • The insurance company may also offer extra discounts to those car owners who drive extra carefully after analysing their driving patterns. 
  • In case a car owner exceeds their given quota of distance travelled, they can instantly recharge their insurance to reset the distance or they can upgrade to a higher plan that offers a higher distance limit. 

How is Telematics Transforming the Future of Car Insurance?

With the help of telematics-based insurance, companies can now offer highly accurate insurance premium rates to car owners. People who drive extremely carefully, and only use their cars sparingly can benefit from reduced premiums. On the other hand, people who drive their cars for long distances regularly will have to pay car insurance premiums that are proportionate to their usage. Moreover, car owners who drive rashly or have a history of getting into accidents may also have to pay higher premiums. The UBI creates a fair system for all car owners, where responsible car owners do not have to bear the burden of supporting irresponsible drivers. While this type of insurance has already become mainstream in many western countries, it is still gaining popularity in India. As it becomes more widely accepted in the country, it will promote more responsible and safe driving, saving thousands of people from accidents. 

How are Telematics Used to Calculate Car Insurance Premiums?

Under usage-based insurance, the premiums are calculated on the basis of the following criteria: 

  • Pay as You Drive 

Under this type of criteria, the insurer will track your previous year’s driving history and then offer you an insurance plan with a driving slab and a fixed distance. The insurance will only cover you till the maximum distance mentioned in the policy. If your distance limit is about to expire, you will need to recharge your insurance or upgrade your plan. 

  • Pay How You Drive 

Under this criteria, insurance premiums are calculated on the basis of your driving pattern. The insurer tracks your driving data through a telematics device for things like driving speed, braking/acceleration, and how responsibly one drives. Safe and careful drivers get lower premiums whereas rash drivers get higher premiums. 

  • Pay as You Go 

Under this criteria, insurance premiums are calculated on the basis of the exact distance travelled by a car owner during the policy term, which is tracked through a telematics device, GPS, or mobile app. This is different from ‘Pay as you Drive’ as there is no pre-set distance or insurance slab, but premiums are calculated on the basis of the exact distance travelled. 


Even as the paradigm of the car insurance industry changes, its utmost necessity remains the same. Before setting off on your adventures, ensure that you have taken out a comprehensive insurance policy. You can consider the car insurance plans available on Bajaj MARKETS. You can also compare the features and pricing of different plans using the ‘Car Insurance Premium Calculator’ and then decide which policy suits your needs. More importantly, you should read the insurance policy document carefully before finalising any plan. 

FAQs on Telematics Car Insurance

  • ✔️Is telematics car insurance available in India?

    Yes, telematics car insurance is offered in India by Bajaj Allianz and some other insurers.

  • ✔️ What are the benefits of telematics insurance for car owners?

    Here are some of the benefits of telematics car insurance: 

    • Is more cost-effective for car owners who drive short distances or only drive occasionally. 

    • Encourages drivers to drive more carefully as they are being tracked. 

    • Provides a fair system of insurance premiums for all types of car owners based on their driving style.

  • ✔️What are the disadvantages of telematics insurance?

    Some of the disadvantages of this type of insurance are: 

    • Costs more for drivers who drive carelessly and those who travel long distances regularly. 

    • All your driving details and routes are shared with the insurance company, which is a negative point for people who wish to keep their information private.

  • ✔️Does telematics insurance cost more than comprehensive car insurance?

    Generally, telematics car insurance is cheaper as compared to comprehensive insurance. In rare cases where the vehicle owner drives vast distances daily, they may have to pay more premiums than regular car insurance.

  • ✔️Can I buy telematics car insurance online?

    Yes, you can buy telematics car insurance by visiting the website of your chosen insurance provider and furnishing personal details as well as paying the premiums.