Usage based Insurance Market – Snapshot

Usage-based insurance (UBI) is a type of motor insurance that determines the premium of the vehicle by tracking the driving behavior of the vehicle. A wireless device is fitted in the vehicle that transmits data to the insurance company in order to charge the premium.

Rising competition among insurance companies to quote a competitive price and to effectively underwrite the insurance is driving the UBI market. Real-time tracking of the vehicle helps assess the risk more accurately and hence, insurance companies can determine indemnity and maintain actuarial reserve. Rising consumer interest in connected vehicles has boosted the adoption of the usage-based insurance. Insurance companies are providing additional services, such as vehicle diagnostics, theft tracking, and breakdown notification, which further help reduce potential fraud and improve underwriting profitability. Drivers who drive safely are encouraged with incentives and quoted further relief in premium, thus boosting the UBI market. Usage-based insurance reduces the price for both the insurer and insured and hence, the demand for UBI is expected to rise during the forecast period. Incidences of fraud and theft are considerably high in Italy and South Africa. Consequently, UBI has high penetration in Italy and South Africa owing to high insurance premiums driving consumers to resort to discounted UBI schemes.

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UBI is a complex insurance model, which requires cross-functioning of various industries such as insurance, IT, telecom, and hardware. The market faces several challenges such as legal hurdles and development of extensive IT infrastructure. Several consumers are not confident about sharing their data. Maintaining data privacy is a critical challenge for insurance companies providing UBI.

The global UBI market can be segmented based on policy type, device type, vehicle type, and region. Based on policy type, the global UBI market can be classified into pay-how-you-drive (PHYD), pay-as-you-drive (PAYD), and manage-how-you-drive (MHYD). PAYD has emerged as a highly preferred type of UBI policy. PAYD is the basic UBI policy where the premiums are decided on the basis of miles driven, usually tracked by the odometer or installed device. Demand for PHYD type of UBI is anticipated to increase during the forecast period. PHYD discounts the premium by monitoring driving behavior, such as acceleration, braking, and location and time of drive. MHYD not only monitors driving behaviour but also provides feedback to the driver in order to encourage safe driving.

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In terms of device type, the global UBI market has been divided into black box, OBD dongle, smartphone, and others. The black box segment held a dominant share of the UBI market, followed by smartphone and OBD dongle segments. The OBD dongle segment accounted for a notable share of the market in North America, while the smartphone is the second-most preferred device, after the black box, in Europe and Asia Pacific. The smartphone segment is expected to expand during the forecast period, as it is a highly convenient means to connect the vehicle over the web with no investment.

Based on vehicle type, the UBI market has been segregated into passenger vehicle and commercial vehicle. The passenger vehicle segment held a dominant share of the global UBI market. The commercial vehicle segment is projected to expand at a high growth rate during the forecast period due to the lower the operating cost of the commercial vehicle.

Based on region, the UBI market has been segmented into North America, Europe, Asia Pacific, Latin America, and Middle East & Africa. In terms of revenue, North America leads the global UBI market, followed by Europe. The market in North America is also expected to expand significantly owing to rising consumer confidence, which in turn is projected to boost the adoption of UBI. The market in Asia Pacific is still at a nascent stage with active pilot programs being conducted in India and China. Europe held a notable share of the global UBI market due to high penetration in Italy and the U.K.

Key players operating in the global UBI market include Progressive, AllState Insurance Company, AXA, AA, Allianz, Uniqa, Generalli, MAIF, Groupama, Aviva, Uniposai, Insure the Box, State Farm, and Liberty Mutual.