What is an example of a usage-based insurance rating factor?

Usage-based insurance (UBI) is a model that adjusts the premiums an insured pays based on their actual driving behavior and habits. One of the key components of UBI is the ability to monitor how a person drives, which is made possible through telematics devices. These devices can record various data points, such as speed, braking patterns, acceleration, and the time of day driving occurs.

The correct answer exemplifies this concept well by indicating that driving habits tracked by a device directly correlate to a driver's real-time behavior behind the wheel. Insurers can then assess risk more accurately by observing how safely and responsibly an individual drives. This is in stark contrast to more traditional rating factors like the type of vehicle owned, age, driving experience, or credit scores, which do not necessarily reflect an individual's current driving behavior. Instead, these are static factors that can lead to generalized assumptions rather than dynamic insights into an individual driver's risks.

Therefore, using telematics to evaluate driving habits provides a more personalized and precise risk assessment, making it a hallmark of usage-based insurance.