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UBI Market size worth over $125 Bn by 2027

  • Published Date: June 3, 2021

Usage-based Insurance (UBI) Market size is set to surpass USD 125 billion by 2027; according to a new research report by Global Market Insights Inc.

Growing adoption of telematics and other communication technologies to monitor the driving behavior is likely to boost industry growth. Rising demand for vehicle telematics to improve the driving behavior and align car insurance premiums with the actual vehicle condition using UBI technology is enhancing the automotive insurance sector’s profitability. UBI uses the telematics data to analyze the risks based on driving behavior, safe driving practices, vehicle conditions, and other trip characteristics.

The increasing smartphone adoption is expected to fuel the UBI market growth

An increasing number of smartphone users is supporting the industry demand. For instance, according to GSMA, smartphone adoption in China was 73% in 2020 and is expected to reach 89% by 2025. The penetration of smartphones and telematics devices has enabled insurers to use consumer behavior data generated by these sources to help develop UBI products. The increased adoption of embedded telematics as well as smartphones integrated with vehicle connectivity systems offers insurers a medium to reduce risks and serve policy holders in real time. The smartphones include many applications that collect vehicle data using various sensors.

Usage-based Insurance (UBI) Market

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PHYD is set to dominate the UBI market revenue

The PHYD segment held over 65% market share in 2020 due to the growing demand to monitor driving behavior to reduce road fatalities. PHYD policies reduce the likelihood of accidents as the insurance amount is based on the personal driving behavior. PHYD products also make it possible to change the driver behavior through financial leverages based on offering incentives to drivers, who drive safe. The PHYD model includes several products, which are used to improve pricing models for drivers, who are at lower risk.

Browse key industry insights spread across 285 pages with 349 market data tables and 32 figures & charts from the report, “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 Type (Passenger Vehicle, Commercial Vehicle), COVID19 Impact Analysis, Regional Outlook, Growth Potential, Competitive Market Share & Forecast, 2021 – 2027” in detail along with the table of contents:

Growing demand to reduce the fleet management operation cost is fueling the demand for OBD-II solutions

The UBI market from OBD-II is estimated to grow at a CAGR of around 15% during 2021 to 2027. The OBD II enables vehicle owners to manage and eliminate the faults in vehicle engines and enhance the vehicle reliability while reducing the cost of fleet operations. The use of OBD II fleet management telematics systems that track drivers’ performance and vehicle utilization is enabling the companies to reduce their fleet insurance premiums. Many insurance companies are using OBD II telematics systems in their UBI programs to analyze drivers’ profiles. For instance, Progressive uses Snapshot to develop usage and driver profile on consumer vehicles.

Growing adoption of telematics solutions in commercial vehicles is supporting the UBI market outlook

The commercial vehicles segment is anticipated to observe 20% CAGR through 2027 propelled by the adoption of telematics solutions across the transportation sector. Telematics solutions help to analyze the vehicle and driver data to assess risks and improve the profit margins. These solutions used in commercial fleets help to integrate various features such as traffic information, on-road assistance, and smart routing & tracking. The insurance providers are evolving to match the changes in the mobility space and are developing new offerings that allow fleet operators to better manage risks

The adoption of advanced technologies in the transportation sector is driving the market growth in North America

North America accounted for a market share of above 40% in 2020. The rapid proliferation of Pay How You Drive (PHYD) and Pay as You Drive (PAYD) insurance models in the U.S. is the primary factor propelling market growth. The automobile sector continues to record a steady growth in the region due to the high penetration of advanced technologies into transportation systems and the increased momentum of autonomous vehicles.

The growing demand for vehicle telematics in the region is also accelerating the adoption of UBI. As the telematics industry continues to evolve with rapid adoption within the auto sector, new and innovative partnerships are developing between auto manufacturers, insurers, Telematics Solution Providers (TSP), and device OEMs to take advantage of this data driven technology.

New product development is the key market strategy adopted by leading players

The major players operating in the usage-based insurance industry are introducing the UBI solutions to support vehicle owners to reduce the fleet management cost. For instance, in June 2020, Tata AIG, an insurance service provider in India, introduced UBI cover with name AutoSafe for private vehicle owners. The company uses telematics devices to track the usage of vehicles to decide the insurance premium.  This initiative helped the company to target more customers in the automotive sector and strengthen its position in the insurance market.

Major UBI market players are Allianz SE, Allstate Insurance Company, ASSICURAZIONI GENERALI S.P.A., AVIVA Plc, AXA, Cambridge Mobile Telematics, Danlaw, Inc., Desjardins Group, Insure The Box Limited, Intelligent Mechatronic Systems Inc., Liberty Mutual Insurance, Mapfre, S.A., Metromile Inc., Nationwide, Octo Technology, Progressive Casualty Insurance Company, Sierra Wireless, State Farm Mutual Automobile Insurance Company,  TomTom International BV, UnipolSai Assicurazioni S.p.A., Verizon Communication Inc., Vodafone Automotive SpA, and Zubie, Inc.

Authors: Preeti Wadhwani, Smriti Loomba