Most of the telematic devices used by insurance companies use cellular phone devices (mostly using 2G which is fairly commonly used for low cost, low data requirement devices) to communicate with a couple of different sensors such as accelerometer. Most also plug into the OBDII vehicle diagnostics port to collect data on the car as well.
From In-Car Sensors Put Insurers In The Driver's Seat:
The palm-sized devices plug into a car’s data port, the same spot
mechanics use for vehicle diagnostics. (All cars made since 1996 have
the ports.) The devices record information about mileage and speed,
which is then used to calculate data about acceleration and braking
trends. Some systems also have GPS capability that is relayed to
insurance companies for research purposes — or to owners like Branson
who opt for driver monitoring.
There has been some concern about security expressed, for instance see Progressive Insurance's Driver Tracking Tool Is Ridiculously Insecure. This article has a number of links to other articles and has this synopsis of the Progressive dongle that was investigated.
The dongle doesn't use any kind of network authentication to encrypt
the data, the firmware isn't signed or validated, and it uses the
infamously insecure FTP – the same protocol to upload and download
files from your home server – to keep the bits flowing.
The bottom line so far as this article is concerned is:
Instead, it's more proof that security in the era of the Internet of
Things – where everything you own is somehow connected – is woefully
See as well Car insurance companies want to track your every move—and you’re going to let them.
Since smart phones have a fairly nice sensor package of acceleromater, GPS, etc. a smart phone app can provide much of the information needed by an insurer. See Insurers will now be able to track driver behavior via smartphones.
UBI offers the insurance industry new opportunities for tailored
discount programs. Notably, they can switch from relying OBDII dongles
plugged into the customer's car and instead use mobile apps that
travel with the driver, whether he's traveling in his own car or