Usage-based insurance market is estimated at USD 36.71 billion in 2020, the usage-based insurance market size is projected to reach USD 125.7 billion by 2027, growing at a CAGR of 19.2 % during the forecast period. Advancement and development of Internet of Things (IoT) has generated a wave of connectivity, which had an influence in almost all industry verticals.
The same wave also has significant impact on automotive and insurance industry. Insurance companies are increasingly utilizing IoT data to improve the precision in gauging risk, pricing policies, and estimating other necessary reserve. The advancement of IoT has led to introduction of insurance policies such as Automotive User Based Insurance (UBI). Automotive user-based insurance can be defined as pay-as-you drive, pay-how-you drive and distance-based insurance. Automotive usage-based insurance is based on telematics, i.e., driving habits such as miles driven, driving speed and hard-braking incidents. Automotive usage-based companies’ installs a telematics device to monitor and record the driving habits. Automotive usage-based insurance offer severs advantages over traditional insurance, it takes into consideration several factors including past driving history, make and model of vehicle, driving method to determine the insurance premium.
Automotive usage-based insurance utilizes real-time data to make decisions about insurance pricing and insurance Package type. Moreover, automotive usage-based insurance offers high level of customization and flexibility to the end-users.
The global automotive user-based insurance market is projected to witness significant growth during the forecast period. According to National Association of Insurance Commissioners (NAIC), about one-fifth of auto insurers will offers automotive usage-based insurance in the next five years. Some of the key driving factors for the growth of global automotive usage-based insurance includes increasing production and sales of automobiles, particularly in the developing countries, changing demographic trend, changing driving habits and increasing number of affluent middle-class population. Furthermore, steady growth and advancement of IoT is expected to further augment the growth of automotive usage-based insurance market during the forecast period.
Automotive usage-based insurance offers a win-win situation for both insurance providers and policyholder. Some of automotive usage-based insurance companies offers incentives for the driver to adopt safer driving practices this in turn, results in reducing the number of accidents and hence, the number of claims the insurance company has to pay out. Furthermore, among various Package type of insurances, distance-based insurance has been witnessing resurgence in the market place, particularly in the European region. This can be attributed to development of telematics. Furthermore, distance-based insurance offers several advantages such as quick to implement, offer more transparency and enables policyholders to effectively choose right insurance meeting their lifestyle needs and values.
The usage-based insurance market is led by globally established players such as Unipol Sai Assicurazioni S.p.A (Italy), Progressive Casualty Insurance Company (US), Allstate Insurance Company (US), State Farm Automobile Mutual Insurance Company (US), and Liberty Mutual Insurance Company (US).
North America is projected to be the largest market for usage-based insurance during the forecast period. The market in North America is expected to grow due to increasing adoption of Mobility as a service and increasing collaborations between telematics and insurance companies. The presence of leading UBI companies such as Progressive Casualty Insurance Company (US), Allstate Insurance Company (US), State Farm Automobile Mutual Insurance Company (US), and Liberty Mutual Insurance Company (US) is also expected to drive the market.
The insurance companies offering telematics insurance are constantly leveraging on various factors to enhance solutions and deliver better packages and schemes. For instance, Progressive Insurance partnered with Toyota Insurance Management Solutions to provide owners of connected Toyota vehicles an opportunity to seek insurance discounts from Progressive Insurance. This benefit extended to any Toyota customer who purchased a 2020 or newer Toyota Camry, RAV4, or other vehicle model equipped with the latest connected vehicle technology. Further, the automotive UBI market players in the US have adopted various initiatives to enhance capabilities and boost their position in the market. They plan to introduce innovative solutions for connected cars and autonomous vehicles.
Report : Usage-Based Insurance Market - By Package Type (Pay-As-You-Drive (PAYD), Pay-How-You-Drive (PHYD), Manage-How-You-Drive (MHYD)), By Vehicle Package Type (Light-duty Vehicle (LDV), Heavy-duty Vehicle (HDV)), By Technology (OBD-II, Smartphone, Black Box, Embedded, Other), And By Region (North America, Asia Pacific, Europe, Middle East & Africa and Latin America) - Industry Analysis, Opportunity and Forecast 2020 To 2027