Usage-based Insurance (UBI) Market Analysis

Usage-based Insurance Market Analysis

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.

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.
 

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.
 

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.
 

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.
 

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.