The impact of vehicle technology on insurance: What drivers need to know in 2025

Gorodenkoff // Shutterstock

The impact of vehicle technology on insurance: What drivers need to know in 2025

It's 2025, and tech-driven cars aren't just futuristic; they're everywhere. From intelligent dashboards to constantly connected systems, today’s vehicles are changing how insurers determine rates and manage claims.

Tools like telematics, advanced driver-assistance systems, electric drivetrains, and real-time data streaming are influencing premiums and shaping the customer experience.

For drivers, that means understanding how these features affect not just your safety but also your insurance costs. With that in mind, CheapInsurance.com has compiled the details you need to know before purchasing a vehicle with newer technology.

Telematics and Usage-Based Insurance: The New Normal

How it works

Telematics uses apps or devices to monitor your driving—speed, braking, time of day, and even mobile phone usage. Safer habits can lead to lower premiums.

Current options include:

Smartphone-based apps
Plug-in dongles
Factory-integrated systems like GM’s OnStar or FordPass

Analyst estimates suggest usage‑based insurance is already a multi‑billion‑dollar market and could continue growing at a double‑digit clip through the early 2030s.

Savings and benefits

Safe drivers are racking up discounts. Independent testing and reporting show some UBI programs can advertise up to around 30–40% discounts, though actual savings vary by driver and program rules.

It’s not just about savings. Telematics encourages safer roads by providing real-time feedback, especially useful for new or high-risk drivers trying to rebuild their record.

Privacy concerns and regulations
Not everyone is on board. In California, insurers can't use telematics to raise rates; they can only offer discounts. Similar restrictions exist in New York and North Carolina.

Still, Car and Driver reports growing anxiety around programs like OnStar Smart Driver sharing data with third-party firms like LexisNexis.

Consumer advocates are pushing for more transparency and better opt-out policies. The key takeaway: Know who sees your data and how it’s used.

The bottom line? Telematics may reward good drivers, but you should always know where your data goes and who profits from it.

Autonomous and semi-autonomous vehicles: Shifting liability
Advanced driver-assistance systems features are lowering accident severity and claims.

23% drop in bodily injury costs
14% drop in property damage
8% reduction in collision losses

Common features:

Forward collision warning
Lane departure warning
Adaptive cruise control
Blind spot detection

These systems can significantly reduce driver error by providing a second layer of awareness. As a result, some insurers now offer separate policy tiers for ADAS-equipped vehicles, offering additional savings or policy flexibility.

Who’s at fault now?

As automation rises, liability is shifting to manufacturers. Goldman Sachs projects insurance costs will plummet by 50% by 2040. Volvo and Mercedes now accept liability for crashes in autonomous mode, according to the law firm Byrd Davis Alden & Henrichson.

This shift redefines fault in accident investigations and could remove the driver from claim disputes altogether if vehicles can generate logs of what happened. For insurers, this represents a significant shift in underwriting risk.

ADAS adds complexity

Repairs cost more:

Repairs are now 37.6% more expensive due to sensor calibration.
The need for specialized tools and techs raises labor costs.

Even small fender-benders involving ADAS sensors can trigger thousands in diagnostic and recalibration fees. This has led some insurers to raise collision coverage minimums on ADAS-equipped models. Until repair infrastructure catches up with innovation, premiums may remain high.

Electric vehicles: The cost-benefit analysis

EV insurance costs vary widely by model and repair profile. Industry data show higher repair complexity and parts/labor times for many newer vehicles (including EVs), while claim frequency/severity patterns differ by make/model. Look beyond averages and check model‑specific loss and repair trends when shopping.

Insurers must also consider the uneven regional availability of EV repair centers in many states. Additionally, newer EVs often include experimental software and hardware that complicate claims.

The most affordable EVs to insure, according to Electrek:

Kia Niro EV: $2,276
Hyundai Kona Electric: $2,276
VW ID.4: $2,318
Nissan LEAF: $2,369

Future outlook

Battery tech is getting cheaper
EV-focused policies are emerging
Cost gap may narrow over the decade

EV-focused policies are on the rise. Some include roadside charging support or battery-specific deductibles.With battery tech getting cheaper and more charging infrastructure appearing, the insurance cost gap may narrow, especially in EV-friendly states offering incentives.

Connected cars and cybersecurity: New risks, new coverage

There are 151.4 million connected vehicles on U.S. roads as of 2023. With that comes risk:

The PerfektBlue exploit exposed millions to Bluetooth-based hacking
Potential for ransomware, identity theft, or hijacking

Cybersecurity is no longer an IT problem; it's a road safety issue. Hackers have demonstrated they can remotely turn off brakes, unlock doors, or track vehicle locations in real time.

In response, insurers may offer:

Ransom reimbursement
Data restoration
Temporary transport coverage

Some policies even include credit monitoring and identity theft protection for affected drivers. These add-ons may become essential as vehicles collect more personal data. Expect cyber coverage to become a standard add-on within comprehensive policies by 2026.

Privacy and regulation

Many drivers are concerned about how insurers and automakers monetize their vehicle data. Expect tighter consumer protections in the next few years.

Policymakers are already eyeing standardization efforts for vehicle data usage disclosures, and consumers may soon have greater control over data permissions directly from in-car dashboards.

Real-time claims and AI automation

Faster claims processing

With AI and telematics:

Claims take 30% less time
Systems detect crashes instantly and alert emergency services
Images and data are analyzed in real-time for damage assessment

Policyholders can now file a claim via smartphone, upload photos, and receive instant estimates, sometimes within hours. Some insurers even auto-approve payments for minor, verified damages. This real-time model reduces insurers' administrative costs while improving customer satisfaction.

Fraud detection gets smarter

AI tools now:

Detect suspicious patterns
Use telematics for crash verification
Slash fraud rates by double digits

Predictive analytics streamlines valid claims and helps prevent rising premiums caused by systemic fraud. Insurers leveraging this technology may offer lower premiums to users who opt in to enhanced monitoring features.

OEM-insurer partnerships: A new insurance frontier

Automakers are getting in the game. Original equipment manufacturers (OEMs) are offering direct or embedded insurance:

GM: OnStar Insurance
Ford: Arity partnership
Toyota: Insurance Management Solutions
Tesla: Usage-based insurance

These programs allow buyers to get coverage quotes at the point of sale. They are often based on predictive models tied to driver behavior and vehicle data.

Embedded insurance is the future

Four main models:

Broker partnerships
White-label products
Captive OEM insurers
MGAs

Expect seamless policy bundling with car purchases. Bundled services appeal to tech-savvy buyers who value convenience and are open to loyalty-based pricing structures. These integrations could eventually reduce underwriting costs while boosting customer retention for insurers and automakers.

Consumer tips for navigating insurance in 2025

Enroll in telematics programs.
Drive ADAS-equipped cars.
Install anti-theft/GPS trackers.

For additional savings, consider defensive driving courses, hybrid vehicle discounts, or bundling policies across home, renters, and auto.

Know your options

Add cyber coverage if you drive a connected car.
Adjust policies for aging vehicles.
Understand your state’s telematics laws.

Review coverage annually, especially after adding new tech or switching vehicles. Understand the implications of data sharing opt-ins and consents. Talk to your insurer about whether new technologies will increase or decrease your premium, and ask for a policy comparison.

Shop Around

Compare usage-based and traditional coverage.
Understand data privacy terms.
Know when to bundle and when not to.

Insurtech platforms now allow side-by-side comparisons with AI-generated savings projections, making it easier than ever to tailor a policy. Be sure to shop at least once a year; even loyal customers can miss out on better tech-driven pricing models.