The Case for Usage-Based Insurance in Commercial Auto

In traditional insurance models, businesses pay a fixed premium based on factors like company size or fleet type, regardless of actual usage or risk. This approach often leads to inefficient underwriting. Usage-based insurance (UBI) offers a dynamic alternative: it uses continuous driving data, such as behavior and vehicle usage, to tailor coverage and pricing with far more precision than static rating factors allow.

What Is Usage-Based Insurance in Commercial Auto?

UBI is a pricing model that ties commercial auto premiums to how a fleet actually operates and drives, using telematics data such as speeding, harsh braking, mileage, and hours of operation, rather than relying solely on fixed classifications like fleet size or vehicle type.

As businesses look for more flexible, cost-efficient coverage, UBI is gaining ground in commercial auto insurance, driven by broad adoption of fleet telematics, demand for personalized policies, and pressure to control rising premiums. Insurers who build effective UBI programs stand to gain sharper underwriting, stronger loss control, and improved profitability.

Globally, UBI has crossed 60 million policyholders, growing at an 18% compound annual rate over the past five years, according to PTOLEMUS Consulting Group’s UBI Global Study. The US leads the world in adoption, with 30 million UBI policyholders, roughly half of all UBI-covered vehicles worldwide. Commercial line UBI is still the smaller half of that market, growing at a more measured 9% CAGR compared to personal lines, which reflects how much underwriting precision and loss control opportunity in commercial auto remains untapped.

Why UBI Adoption Is Accelerating in Commercial Auto

Fleets are drawn to UBI for the savings it can offer amid persistent rate pressure. Commercial auto claims severity has climbed 64% since 2015, and thermonuclear verdicts, jury awards exceeding $100 million, rose 81% in a single year, according to SambaSafety’s 2026 Driver Risk Report. Commercial underwriting losses approached $4.9 billion in 2024 alone, resulting in 14 consecutive years of losses for the insurance segment.

PTOLEMUS’s research points to the same pressure from a different angle. Persistent unprofitability despite repeated tariff increases, combined with nuclear verdicts (jury awards typically exceeding $10 million in the US) and the growing availability of fleet telematics data, are among the clearest drivers pushing commercial insurers toward usage-based pricing. Two independent research firms, looking at the market from different vantage points, are converging on the same conclusion: insurers that keep pricing commercial auto on static, backward-looking classifications are absorbing risk they could otherwise see coming.

Usage-based insurance gives both sides a clearer path forward. Fleets with strong driving records and fewer claims are rewarded with lower premiums, while insurers gain the granular data needed to price risk more accurately.

The Telematics Adoption Gap Insurers Still Need to Close

Telematics has become standard equipment for fleet safety. SambaSafety’s 2025 Telematics Report found that 88% of fleets now use telematics for safety, up from prior years. That data is the foundation on which UBI programs depend.

But adoption alone doesn’t build a UBI program. Only 30% of fleets currently share their telematics data with insurers, a six-point drop from the year before. That’s the gap standing between widespread telematics use and widespread usage-based pricing.

The reason isn’t resistance. It’s a communication gap. Of fleets that don’t share their data, 79% say it’s simply because no one has asked. That’s a solvable problem, and one with real upside for insurers willing to close it directly with policyholders.

Insurers face their own maturity gap. Among the nation’s top 50 commercial insurers, 80% now use telematics data, yet only 4% consider their programs advanced. Among smaller insurers, 70% report using telematics, but none have reached an advanced stage yet. The infrastructure exists. What’s missing for many is the operational maturity to translate that data into consistent underwriting action.

3 Barriers Standing Between Insurers and Scalable UBI Programs

1. Education and Trust

Convincing fleets to share telematics data remains the top challenge for commercial carriers, and it’s largely a trust and communication issue rather than a technology one. With 79% of non-sharing fleets saying they’ve simply never been asked, insurers have a direct opportunity to close the gap: explain how the data will be used, what fleets get in return, and build the kind of transparency that turns hesitant policyholders into active participants.

2. Data Management and Normalization

Once fleets are willing to share, insurers face a second hurdle: making sense of data that arrives in dozens of formats from dozens of providers. Standardizing and normalizing telematics feeds across telematics service providers (TSPs) remains a top obstacle to scaling programs beyond pilot status, and the cost of aggregating and managing that data is a close second.

3. Fleet Technology and Integration Costs

Upgrading or standardizing fleet technology to support consistent telematics and UBI participation remains a real cost barrier for many insurers and their policyholders. The opportunity lies in working with data aggregation partners that already integrate with the telematics providers fleets have in place, so insurers can activate usage-based pricing without requiring fleets to adopt new hardware.

3 Benefits of UBI for Commercial Insurers

Underwriting Precision

UBI improves underwriting accuracy through predictive analytics, pricing risk based on real driving behavior and usage rather than static classifications. That precision benefits both sides of a data-driven underwriting relationship, and it directly addresses premium leakage from underpriced accounts. Insurers price risk more accurately, and fleets pay for the coverage that actually reflects how they operate. Over time, that same continuous data can support straight-through processing in insurance, helping underwriters move bindable business through the pipeline faster instead of waiting on incomplete, self-reported information.

Evidence-Based Loss Control

UBI strengthens loss control by providing insurers with a continuous view of policyholder risk rather than a once-a-year snapshot. Telematics-driven insights allow insurers to recommend targeted interventions, such as driver training, that address specific violations and behaviors. Fleets that combine continuous monitoring with targeted training have reduced violations by up to 77% within 12 months.

Stronger Retention

Policyholders who see lower premiums and personalized risk management from their insurer are more likely to stay. That collaborative relationship also opens the door to further engagement, from risk consulting to expanded training programs, creating long-term value on both sides of the policy.

What This Means for Commercial Auto Underwriting Going Forward

Usage-based insurance isn’t a future trend anymore. It’s a present-day underwriting shift, and one that rewards insurers who can close the data-sharing gap rather than simply wait for fleets to volunteer information. The commercial auto insurers building durable UBI programs are the ones treating telematics collaboration as an active conversation with policyholders, not a passive data feed.

The stakes go beyond any single policy. Claims severity trends and social inflation are pushing combined ratios in the wrong direction across commercial auto, and insurers that continue to underwrite on static, backward-looking classifications are the most exposed when severity spikes again. As fleet telematics use continues to climb and insurer programs mature past the pilot stage, the advantage will go to insurers who can turn continuous driving data into consistent, scalable, data-driven underwriting decisions.