Data on Driving May Persuade Drivers to Upsize Their Insurance Coverage

08-18-2025

If you’re a good driver, then probably you don’t need as much insurance, right? What if you have the data to prove to yourself and your auto insurance company that you are one of the better drivers on the road? Would you scale back your coverage?

According to J.D. Power, by 2023, 17% of consumers adopted usage-based insurance (UBI), agreeing to let telematics measure driving habits like hard braking and mileage driven. And research from the Daniels School’s Ting Zhu has found that consumers improve their driving after allowing telematics to monitor and report on their behavior. Plus, better drivers also receive a discount when they demonstrate their driving ability through the use of UBI.

Now, Zhu and co-authors Miremad Soleymanian and Charles B. Weinberg have surprising new findings from their latest paper published in the Journal of Risk and Insurance. In first-of-its-kind research, they rigorously examined how UBI not only alters consumer behavior but also opens previously overlooked opportunities. They found that some drivers — with better knowledge of their own driving skills and with a price discount — prefer to upgrade their coverage, providing opportunities for insurers to upsell and cross-sell.

For many auto insurers, UBI stands as one of the most promising, yet underutilized, innovations. While telematics-driven UBI now commands worldwide attention, its small market share remains an intriguing trend, considering its technological potential and personalization capabilities.

Despite a growing body of literature on UBI — primarily focusing on risk reduction, consumer selection and safer driving — there is a glaring gap when it comes to understanding its direct impact on encouraging customers to buy higher-value coverage and bundling additional products. Zhu and her colleagues’ study is the first empirical analysis to quantify and demystify how UBI actually influences customers’ changing insurance coverage choices at policy renewal. In an industry where market growth has been largely stagnant, particularly in mature markets like the U.S., this insight is revolutionary.

Using a robust dataset from a major U.S. insurer encompassing 135,540 customers, Zhu’s team unearthed patterns that traditional insurance analytics have missed:

• UBI customers are more than twice as likely to upgrade coverage at their first renewal compared to non-UBI customers (17% vs. 8%).
• UBI customers also exhibit greater experimentation: 24% change their coverage at renewal — with most opting for higher protection.
• Those who receive higher discounts from safe driving are most likely to both upgrade coverage and purchase additional options such as comprehensive insurance, a clear marker of effective cross-selling.

For insurers grappling with slow premium growth and stiff competition, upping the ante on customer lifetime value is critical. UBI provides the dual levers of personalized coaching (via feedback) and tailored pricing, not only drawing tech-savvy demographics but also fostering long-term loyalty through smarter coverage choices.

Key implications are that

• Timing is everything. The first renewal after UBI enrollment is a prime window for targeted upselling and cross-selling initiatives. That’s when customers are most responsive to both feedback and price signals.
• It’s not just about discounts. Information feedback — such as real-time notifications on driving behaviors — actively recalibrates customers’ self-perception and risk appetite, influencing their willingness to buy more than just the cheapest coverage.
• It can build retention and growth. UBI participants not only stay longer but also become better prospects for add-on products and coverage upgrades, multiplying their LTV in ways that traditional policies rarely achieve.

Despite the slow diffusion of UBI due to factors like consumer privacy concerns, data accuracy and inertia, the evidence is clear: UBI’s unique structure triggers positive changes in buying behavior that go beyond the core insurance transaction. With only a fraction of drivers currently enrolled, there is significant headroom for insurers to deploy UBI not just as a competitive differentiator, but as a tool for deeper customer engagement and revenue diversification.

The research zeroes in on profitable customer behavior shifts due to UBI-specific incentives. Zhu presented at the Tepper School of Business’ 75^th Anniversary Symposium in March 2025, where it received positive feedback from researchers and industry experts. While it has yet to affect the insurance industry, it has gained the attention of several major automobile insurers. After all, as UBI’s market share slowly inches up, insurance companies have opportunities to reap outsized rewards — if they recognize and act on these new levers of customer behavioral change.