What is Usage-Based (UBI) car insurance, and how do I get the biggest discount?

Who is this article for?

Car owners who want to pay less for motor insurance, especially those with connected cars or who drive fewer kilometres than average. It's also for anyone who has seen an offer of a "safe driving discount" and wants to understand what they are signing up for.

What is usage-based insurance?

Usage-based insurance links part of your premium to real driving data instead of only your car's model, age and city. IRDAI allowed general insurers to offer these technology-based add-ons on the own-damage cover in July 2022. Your third-party premium, which is fixed under the rules, stays the same.

There are two main types:

Type	What it rewards	How it's measured
Pay as you drive (PAYD)	Driving fewer kilometres	You choose a kilometre limit for the year; checked by odometer readings or telematics
Pay how you drive (PHYD)	Driving safely and smoothly	A driving score built from data on speed, braking, acceleration and similar habits

Some insurers combine both, and some also offer a floater that covers several vehicles owned by the same person under one policy.

Where does the driving data come from?

• A mobile app on your phone that records trips using its sensors and GPS

• A small device plugged into the car, usually provided by the insurer
• The car itself, if it is a connected car that already records driving data

What's new: carmakers are joining in

In November 2026, Hyundai Motor India launched usage-based insurance for owners of its Bluelink-connected cars. Here is how it works, based on the company's announcement:

• The car builds a driving score from the previous three months of driving.
• Owners whose insurance renewal falls within the next 90 days can see their score in the Bluelink app.
• A score of 70 or above may qualify for savings of up to 15% on the own-damage premium, depending on each insurer's underwriting rules.
• The score is shared with participating insurers only if the owner agrees, through Hyundai's insurance broking arm. Drivers below the threshold get tips to improve their score.

Other carmakers with connected cars are likely to follow, so this is worth understanding even if you don't drive a Hyundai.

What does a driving score usually look at?

Each programme has its own formula, but most look at some of these:

• Harsh braking: sudden, heavy stops
• Rapid acceleration: flooring it from signals or in traffic
• Speeding: how often and how far you go over the limit
• Sharp cornering: taking turns too fast
• Idling: leaving the engine running while parked or waiting
• Time of day: late-night driving is often treated as riskier
• Distance: total kilometres driven

How do I get the maximum discount?

1. Start early. If the score uses the last three months, your habits from three to four months before renewal decide the discount. Set a reminder about four months before your policy ends.
2. Drive smoothly, not slowly. Gentle acceleration, early and gradual braking, and steady speeds usually matter more than driving below the limit.
3. Leave space in traffic. A bigger gap to the car in front means fewer sudden stops, which helps in stop-and-go city traffic.
4. Cut idling. Switch off when parked or waiting for long.
5. Keep tracking switched on. Make sure the app, device or connected service stays active and paid up during the scoring period. Missing data can lower your score or make you ineligible.
6. Remember who else drives. If family members or a driver use the car, their driving counts too. Share the tips with them.
7. Check your score before sharing it. Most programmes let you see the score first. Share it when it's at its best.
8. For pay-as-you-drive, pick a realistic kilometre limit. Too low and you may pay extra or face limits; too high and you lose the saving.
9. Protect your no-claim bonus. NCB is usually a separate, bigger discount on the same own-damage premium. Avoid small claims you can pay for yourself.
10. Compare the final premium, not the discount. A 15% discount on a higher premium can still cost more than another insurer's normal price. Compare like for like: same insured value (IDV), same add-ons, same deductible.

What should I check before signing up?

• What data is collected: location, speed, trip times, and whether it covers people other than the owner.
• Who sees it: the carmaker, the broker, one insurer or several. How long it's kept, and whether it can be used for anything other than insurance pricing.
• Whether you can withdraw consent, and what happens to your data if you do.
• Whether a poor score can raise your premium, or only remove the discount.
• Any subscription cost for the app or connected-car service, and whether the saving covers it.

Is usage-based insurance right for me?

It tends to suit people who drive less than average, drive mostly in daytime, are comfortable sharing driving data, and want feedback on their habits. It suits people less if they drive long distances daily, drive a lot at night, or would rather not have their trips tracked. Either way, the choice is yours: these are optional add-ons, not compulsory cover.

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This is general information, not advice to buy or change any policy. Discounts, scoring rules and eligibility depend on each insurer and programme.

Questions people ask

Sources

1. IRDAI circular permitting technology-enabled add-ons (pay as you drive, pay how you drive, floater) for motor own-damage cover, July 2022
2. Business Today: "Hyundai's connected car customers can now opt for usage-based insurance and save up to 15%" (5 Nov 2026)
3. Autocar Professional: "Hyundai introduces usage-based insurance for Bluelink customers" (5 Nov 2026) —