The concept of telematics is pretty straightforward. A data collection device is plugged into the OBD-II port of the policyholder's car. The device then collects data on acceleration, location, miles traveled and braking speeds to create a picture of how the policyholder is driving. The data is then uploaded for the insurance company to review. Insurance companies can analyze how policyholders are driving to price policies more competitively, according to the National Association of Insurance Commissioners (NAIC).