Most insurers that offer a tracking-based discount also offer policies without. It seems to me, all that matters is, on average, they don't offer a discount to tracker users that is larger than those users, as a pool, save them in claims.

The only incentive to get it "right" is that, if they do a really poor job at this, they will lose business to insurance companies that do a better job at it -- again, to the extent that the differences between insurers are significant, that customers are price sensitive, aware enough to shop around and compare the actual rates they pay, etc.

We already know that your non-tracker-based insurance premiums may vary wildly from one insurer to another. One may penalize you heavily for being 18. One may offer a larger discount to those who complete driver's ed courses, or own a car with airbags.

Maybe you'll be penalized for that first accident or ticket, or maybe your insurance company will give you some leeway (and, presumably, double down on the surcharge after your second accident).

I don't see how it's inherently obvious that an insurer that gets their tracker-based metrics 'wrong' will go out of business in short order. Again, all they have to do is charge more than they pay out in claims and overhead.