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Usage-based Insurance (UBI) Market Size By Package (Pay-How-You-Drive (PHYD), Pay-As-You-Drive (PAYD) [Device-based, Telematics-based]), By Technology (OBD-II, Smartphone, Blackbox, Embedded Telematics), By Vehicle (Passenger Vehicle, Commercial Vehicle), COVID-19 Impact Analysis, Growth Potential, Regional Outlook, Competitive Market Share & Forecast, 2023 – 2032

  • Report ID: GMI3020
  • Published Date: Nov 2022
  • Report Format: PDF

Industry Statistics

Usage-based Insurance Market size exceeded USD 45 billion in 2022 and is projected to expand at more than 23.5% CAGR from 2023 to 2032. The rapid proliferation of in-car technologies and the remarkable surge in connected cars are set to accelerate customer inclination toward usage-based insurance.
 

Usage-based Insurance (UBI), also referred to as Pay How You Drive (PHYD) and Pay As You Drive (PAYD), is an alternative offered by auto insurance providers, where the costs depend on the type of vehicle used, measured against distance, behavior, time, and place. This allows drivers to earn rewards based on their skills, resulting in cheaper insurance costs, thus creating favorable growth prospects for the UBI industry.
 

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In addition, several insurance firms have been associating themselves with AI and IoT-based software providers to develop appropriate telematics software applications to track user data and make personalized insurance quotes, further strengthening the industry outlook. For instance, in February 2021, My Policy Group, a data analytics-based motor insurance provider in the UK, partnered with Zurich Group, a connected vehicle & telematics solution provider, to bolster its capabilities in connected cars.
 

Rising privacy concerns to restrict usage-based insurance market growth

UBI-based pricing models and telematics devices collect tremendous user and vehicle-related data, leading to increased safety and privacy concerns. A noticeable rise in cyber threats and data breaches may necessitate the requirement for introducing more robust security solutions, which may result in higher operational costs, which, in turn, may impede the business progression. Moreover, the incapability of smartphones to capture movements with high dynamics owing to data quality issues will further hamper the product adoption rate during the forecast timeframe.
 

Increased affordability to augment the demand for PHYD insurance programs

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Based on the package, the PHYD (Pay How You Drive) segment accounted for around 69% of the usage-based insurance market share in 2022. PHYD insurance models reward safer driving through cheaper premiums, compelling risky drivers to alter their driving behavior or else pay higher insurance costs. This would lead to improved road behavior and lesser road mishaps, driving product adoption. Besides, an increasing number of insurance companies offering attractive deals and discounts will propel segment growth.
 

Improved fleet experience to foster the adoption of device based PAYD insurance models

The device-based usage-based insurance market is slated to record nearly 24.5% gains between 2023 and 2032. Automotive manufacturers across the globe have been making use of OBD devices to read fault codes and parameters related to the improper functioning of emission systems. This helps insurers and carmakers to utilize this data to specify driver behavior, road conditions, and fuel efficiency. The program helps enhance the overall fleet experience while ensuring driver safety, which is set to transform the industry dynamics.
 

Unbiased data collection to increase the penetration of OBD-II technology

In terms of technology, the OBD-II segment held over 47% of the revenue share in 2022. This growth is attributed to the increasing number of insurance service providers utilizing OBD II telematics systems in their UBI programs to record driver's profiles and fleet data remotely. These systems ensure that the data collected is unbiased and fair across all vehicle types and demographics and help in preventive maintenance by sending real-time fault codes to the server.
 

Commercial UBI insurance to gain popularity due to paid fleet expansion

The usage-based insurance market from commercial vehicle segment is predicted to observe 26% growth rate till 2032 driven by the considerable surge in commercial vehicles and the increasing penetration of vehicle insurance policies. UBI programs help retain fleet repair costs in case of accidents and cover any injuries sustained by the driver, saving a lot on vehicle maintenance expenses. The integration of these technologies across commercial vehicles enables real-time communication, thus improving driving efficiency and opening new growth avenues for the industry.
 

Supportive policy framework to boost product demand across Europe

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Europe usage-based insurance market size is poised to depict over 24% CAGR through 2032. This growth is credited to the favorable policy interventions related to passenger and vehicle safety and stringent regulatory mandates pertaining to the use of OBD systems and fuel usage across vehicles. Furthermore, the increasing sales of connected cars, aided by a robust economic outlook, will proliferate the regional landscape.
 

Strategic alliances to define the competitive landscape

Leading companies operating in the usage-based Insurance market are ARGO Data Resource Corporation, Allstate Insurance Company, Aviva plc, AXA Equitable Life Insurance Company, and others. These leaders have been bolstering their strategic associations as part of their key growth measures. For instance, in November 2022, Mobilize Financial Services teamed up with Accenture to create and manage the insurance platform from end to end. The platform aims to develop optimized and unique experiences across the entire customer journey, from sales and loyalty to the affirmations process, facilitated by an embedded insurance solution that leverages car connectivity.
 

Impact of COVID-19 on the UBI market

The UBI industry registered a significant boost in light of the COVID-19 pandemic. The government-imposed movement restrictions across several economies significantly reducing car usage during the crisis, resulting in a decline in the number of accidents and insurance claims. Additionally, the onset of the health calamity accelerated the consumer shift from shared mobility to personal transport. Besides, automakers globally emphasized leveraging connected technologies to drive substantial digital engagement and enhance their profit margins. These factors, in association with the transitioning consumer behavior towards paying lesser premium costs, supported product penetration during the virus outbreak and are expected to witness a similar trend over the projection period.
 

The usage-based insurance (UBI) market research report includes in-depth coverage of the industry with estimates & forecast in terms of revenue in USD from 2018 to 2032, for the following segments:

Market Insights, By Package

  • PHYD
  • PAYD
    • Device-based
    • Telematics-based

Market Insights, By Technology

  • OBD-II
  • Black Box
  • Smartphone
  • Embedded telematics

Market Insights, By Vehicle Type

  • Passenger vehicle
    • OBD-II
    • Black Box
    • Smartphone
    • Embedded telematics
  • Commercial vehicle
    • OBD-II
    • Black Box
    • Smartphone
    • Embedded telematics

The above information has been provided for the following regions and countries:

  • North America
    • U.S.
    • Canada
  • Europe
    • Italy
    • UK
    • Germany
    • France
    • Spain
    • Netherlands
    • Austria
  • Asia Pacific
    • China
    • Japan
    • Australia
    • India
    • South Korea
    • Southeast Asia
  • Latin America
    • Brazil
    • Mexico
    • Colombia
  • Middle East & Africa
    • South Africa
    • Saudi Arabia
    • Qatar
    • UAE

 

Authors: Preeti Wadhwani, Smriti Loomba

Frequently Asked Questions (FAQ) :

The market size of usage-based insurance crossed USD 45 billion in 2022 and is predicted to depict nearly 23.5% CAGR through 2032 driven by the burgeoning connected car sales and the increasing penetration of in-car technologies.
The PHYD (Pay How You Drive) segment accumulated more than 69% of the market share in 2022 owing to the increasing emphasis on ensuring driver safety and an accelerating consumer shift toward cheaper insurance premiums.
The OBD-II segment garnered over 47% of the revenue share in 2022 attributed to the rapid integration of telematics systems and the unbiased data collection services offered by OBD-technology.
The Europe UBI industry size is projected to exhibit around 24% CAGR through 2032 on the back of supportive government policies and a flourishing economic landscape.

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Premium Report Details

  • Base Year: 2022
  • Companies covered: 30
  • Tables & Figures: 424
  • Countries covered: 22
  • Pages: 220
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