Usage-based insurance
Usage-based insurance (UBI), also known as pay as you drive (PAYD), pay how you drive (PHYD) and mile-based auto insurance, is a type of vehicle insurance whereby the costs are dependent upon type of vehicle used, measured against time, distance, behavior and place. This differs from traditional insurance, which attempts to differentiate and reward "safe" drivers, giving them lower premiums and/or a no-claims bonus. However, conventional differentiation is a reflection of history rather than present patterns of behaviour. This means that it may take a long time before safer (or more reckless) patterns of  driving and changes in lifestyle feed through into premiums. Concept. The simplest form of usage-based insurance bases the insurance costs simply on distance driven. However, the general concept of "pay as you drive" includes any scheme where the insurance costs may depend not just on how much you drive but how, where, and when one drives. Pay as you drive (PAYD) means that the insurance premium is calculated dynamically, typically according to the amount driven. There are three types of usage-based insurance: The formula can be a simple function of the number of miles driven, or can vary  according to the type of driving or the identity of the driver. Once the basic scheme is in place, it is possible to add further details, such as an extra risk premium if someone drives too long without a break, uses their mobile phone while driving, or travels at an excessive speed. Telematic usage-based insurance (i.e. the latter two types, in which vehicle information is automatically transmitted to the system) provides a much more immediate feedback loop to the driver, by changing the cost of insurance dynamically with a change of risk. This means drivers have a stronger incentive  to adopt safer practices. For example, if a commuter switches to public transport or to working at home, this immediately reduces the risk of rush hour accidents. With usage-based insurance, this reduction would be immediately reflected in the cost of car insurance for that month. The smartphone as measurement probe for insurance telematics has been surveyed Another form of usage-based insurance is PHYD (Pay How You Drive). Similar to PAYD, but also brings in additional sensors like accelerometer to monitor driving behavior. Patents. There are several issued patents and pending patent applications that have been filed worldwide on  various inventions related to telematic auto insurance. These include: In order to make sure that patents did not hinder its Pay as You Drive development program, Norwich Union purchased the UK version of EP0700009 and obtained an exclusive license to any EU patents that may emerge from Progressive's EU patent applications. In June 2010, Progressive Auto Insurance filed a patent infringement lawsuit against Liberty Mutual over one of Progressive’s Pay As You Drive auto insurance patents. In September 2010 Progressive Auto Insurance filed a declaratory judgment lawsuit against Hughes Telematics to have several its patents covering OBDII mounted  wireless data loggers declared invalid. Progressive uses these devices from a competitive supplier, Xirgo Technologies. Impaired driving. Telematics have been proposed or utilised in order to detect distracted driving. The use of telematics to detect drunk driving and Texting while driving has been proposed. A US patent application combining this technology with a usage based insurance product was open for public comment on peer to patent.