Usage-Based Insurance Market Set to Surge to $80.7 Billion by 2028 at a 21.4% CAGR

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Nov 01, 2023, 13:30 ET

DUBLIN, Nov. 1, 2023 /PRNewswire/ -- The "Global Usage-based Insurance Market for ICE & Electric Vehicle, by Package (PAYD, PHYD, MHYD), Technology (OBD-II, Embedded Telematics Box, Smartphone), Vehicle (New, Old), Device Offering (BYOD, Company Provided), and Region - Forecast to 2028" report has been added to ResearchAndMarkets.com's offering.

The global usage-based insurance market is estimated to grow from USD 30.6 billion in 2023 to USD 80.7 billion by 2028 at a CAGR of 21.4% during the forecast period.

With the increased penetration of connected cars, which makes it easy to collect vehicle and driver data, usage based insurance is estimated to showcase steady growth in the coming years. Additionally, benefits offered by usage based insurance, such as personalized offerings, lower premiums, and greater control compared to conventional insurance, make it more preferred. Also, the trend for drivers to choose personalized insurance products has increased for individuals to save money on insurance premiums. Hence, these factors are driving the UBI market during the forecasted period.

The OBD-II device segment is the fastest-growing segment in the usage based insurance market

Telematics solutions based on OBD continue to rule the usage based insurance (UBI) market today, where smartphone penetration seems to rise. OBD-II-based UBI programs are extensively used in personal auto insurance. OBD-II based UBI programs are extensively used in private auto insurance.

The gadget connected to the OBD-II port keeps track of driving data such as mileage, speed, acceleration, and braking behaviors. The data is then used to build the insurance rates and personalized insurance choices. Embedded telematics box based UBI programs are extensively used in personal and commercial auto insurance. The devices come in four different versions: Bluetooth, Wi-Fi, 4S Shop error code clear tool, and telematics (GPS).

The OBD-II interface became popular in the US in 1996 as the US federal law amended regulations for equipping OBD-II devices in all vehicles. Later on, in January 2006, the OBD-II port was made compulsory in Australia & New Zealand. Miles had launched Miles Tracker, plugging into the port to gather the data. Mercedes Benz used Miles Tracker in European models to track the vehicle. Usage Based Insurance has become extremely popular since its introduction, especially since Progressive's Snapshot program.

The EOBD/OBD-II dongle has evolved into various solutions tailored to different rules, market needs, and market niches. Increased vehicle sales have indeed had a positive impact on the sales of OBD-II (On-Board Diagnostics II) devices. For instance, according to OICA, global production has increased by 6% in 2022 compared to 2021 (i.e., 85 million units). Thus, these factors drive the OBD-II device market in the UBI market.

Pay As You Drive is dominating the UBI market by package type

Pay as you drive (PAYD) insurance is playing a pivotal role in driving the Usage-Based Insurance (UBI) market by revolutionizing the way of calculating the insurance premiums on the miles that are driven. PAYD technology monitors the driver's behavior, such as their speed, distance traveled, and driving habits, and charges the insurance premiums based on actual usage and driving performance; PAYD encourages safer driving and rewards responsible behavior. This program appeals to conscientious drivers and provides insurers with more accurate risk assessment data, enabling them to offer tailored coverage and pricing. This enhances the competitiveness of insurance offerings, promotes road safety, and reduces environmental impact by encouraging reduced mileage and eco-friendly driving practices.

For Instance, Progressive Snapshot is a PAYD program that uses a small plug-in device to track how drivers drive. Progressive Snapshot participants can save up to 30% on their insurance premiums. Also, in 2020, ICICI Lombard (India) began providing telematics-based products with a Disclaimer, including "pay as you use" and "pay how you use." Under the Regulatory Sandbox proposal, Pay How You Use (PHYU) (Sandbox application no. 173) is available as an experiment from 1st February 2020 to 31st January 2021. This program is saving environmental hazards by reducing vehicle emissions by encouraging drivers to drive less and greener. Due to this, the number of accidental cases has reduced as people drive less and avoid the associated risk. As consumers increasingly seek customized insurance solutions, PAYD drives the UBI market by aligning insurance pricing with actual driving habits and preferences, ultimately benefiting insurers and policyholders.

Europe is the second fastest growing market

Due to a confluence of factors, Europe has emerged as the second fastest-growing region for the usage based insurance market. The region benefits from solid regulatory support, with governments and regulatory bodies actively endorsing UBI initiatives to promote road safety and incentivize insurers. In May 2019, the European governing body implemented a guidance named "European Data Protection Board" (EDPB) for the data privacy of the customers for many industries, including the automotive sector.

Europe boasts a well-established telematics infrastructure, with a significant portion of vehicles equipped with advanced telematics systems, facilitating the adoption of UBI programs. According to the European Commission report 2023, around USD 189 billion has been invested in digital technologies which contain Artificial Intelligence (AI), robotics, and new materials for which 28 new projects were selected in March 2023. These investments have helped the UBI companies develop new applications (AI, Blockchain, Machine learning) to gather information about drivers' behavior and set insurance prices.

Also, urban congestion, traffic safety concerns, and environmental priorities have further driven interest in UBI to encourage safer and eco-friendly driving behaviors. The European region has set ambitious targets to reduce vehicle emissions in the coming years. For example, the EU aims to reduce CO2 emissions from new passenger cars by 55% by 2030 and 100% by 2035. This regulation has led to the adoption of telematics vehicles to monitor vehicle performance and inform drivers to improve their driving habits.

Premium Insights

Increasing Adoption of Telematics and Connected Car Services to Drive Usage-based Insurance Market
LDV Segment to Hold Larger Market Share by 2028
Old Vehicle Segment to Hold Larger Market Share by 2028
PAYD Package Type to Dominate Market by 2028
Embedded Telematics Box to Command Largest Market Share by 2028
Company-Provided Devices to be Larger Segment by 2028
BEV Segment to Hold Largest Market Share by 2028
North America to Dominate Market During Forecast Period

Market Dynamics

Drivers

Increasing Adoption of Telematics and Connected Cars
Reduction in Insurance Premium and Risk-Related Costs

Restraints

Ambiguity Over Regulations and Legislative Environments

Opportunities

Developing Automotive Usage-based Insurance Ecosystem

Challenges

Data Privacy
Lack of Common Framework for All Services and Devices
Need for Transparency and Accountability

Case Study Analysis

Happiest Minds (India) Case Study
British American Tobacco (BAT)
Amaline

Companies Mentioned

Allianz
Allstate Insurance Company
Amica
Assicurazioni Generali S.P.A
AXA
Cambridge Mobile Telematics
CCC Intelligent Solutions Inc.
Happiest Minds (India)
Hyundai Motor Company
Insure the Box Limited
LexisNexis
Liberty Mutual Insurance Company
Lytx
Mapfre
Metromile, Inc.
Modus Group, LLC
Nationwide Mutual Insurance Company
Octo Group S.P.A
OnStar, LLC. (General Motors)
Progressive Casualty Insurance Company
Sierra Wireless
State Farm Mutual Automobile Insurance Company
Tesla
The Floow Limited
Trak Global Group
UnipolSai Assicurazioni S.P.A
Verisk Analytics, Inc.
Verizon
Webfleet Solutions
Zubie, Inc.

For more information about this report visit https://www.researchandmarkets.com/r/jqdxl4

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