Global Automotive Usage Based Insurance Market Outlook - Forecast Trends, Market Size, Share and Growth Analysis Report (2024-2032)

Automotive Usage Based Insurance Market Growth

The increasing popularity of smartphones has provided insurance providers access to means to enhance and strengthen their relationships with clients. Today, insurance providers can leverage mobile telematics apps to offer unique incentives to drivers who exhibit safe on-road habits. Gestures such as congratulating a driver through a smartphone message on completing a long road trip safely and efficiently, or offering a bonus, rebate or reward for a demonstrating an on-road skillset are likely to strengthen company-client relationship, which can boost the automotive usage based insurance demand.

Benefits of usage based insurance (UBI) include improved driving, possibly lower premiums (safer and better driving would lead to lower premiums), possible reduction in road accidents, enhanced road safety, and better insurance products (with the help of the right kind of data, insurance companies may devise novel, improved, and beneficial need-based insurance policies).

Read more about this report - REQUEST FREE SAMPLE COPY IN PDF

Automotive Usage Based Insurance Market Trends

Usage based insurance (UBI) is a type of insurance where the premium payable is directly linked to the use of the insured product or service. In the automotive insurance industry, usage based insurance is also known as Telematics insurance. Usage based insurance is quite prevalent for vehicles in developed countries. In a usage based insurance program, the automobile insurance company would keep a track of the way one drives; if the driving gets a good score, then it could lead to lower rates of car insurance. Usage based insurance programs usually assess acceleration, speeding and harsh braking, and also consider mileage and the time of day of the drive, which can contribute to the growth of the automotive usage based insurance market.

Driving is scored, and the driver is also given tips to better the score. The better the driving, the better the auto insurance rates. Usage based insurance programs gather vehicle telematics data with the help of cellular, GPS or other technologies. Telematics devices used in usage based insurance (UBI) include smartphones with mobile apps, 12V dongles, Bluetooth connections, black boxes, GPS devices, and on-board sensors. The data so gathered include hard braking, acceleration, miles driven, speed, hard cornering, time of day, use of phone while driving, etc. Usage based insurance is gaining recognition and acceptance, with a significant percentage of drivers choosing a telematics option when offered.

The different types of usage based insurance for automobiles include:

Pay as You Drive (PAYD) – Insurance premium is charged on the basis of the amount of driving done, influencing automotive usage based insurance market dynamics and trends.

Pay How You Drive (PHYD) – Insurance premium is charged on the basis of the driving skills of the driver. Parameters include acceleration, hard braking, hard turning, etc.

Pay as You Go (PAYG) – This method warrants the installation of a Telematics device, and could a combination of the aforementioned points.

Distance-based Insurance – Based on the number of miles travelled by the automobile during the policy period.

Recent Developments

Leading companies are coming together to offer usage based insurance to new vehicle owners. For example, in 2023, State Farm® and Ford announced the launch of Drive Safe & Save™ Connected Car for customers with eligible connected Ford or Lincoln vehicles, to benefit from usage based insurance that can aid the automotive usage based insurance demand.

In 2023, Otonomo and Audi AG came together to focus on innovative, data-driven services. Audi would provide Otonomo with GDPR-compliant access to Audi car data, quickening the development of advanced mobility solutions, from pay-as-you-drive (data could be used for usage based insurance; elements included mileage readings and parking time) and insurance services to general vehicle status, first notification of loss, accident reporting, etc.

Industry Outlook

Rising Vehicle Ownership Globally Presents an Opportunity for Automotive Usage Based Insurance Market.

According to OICA data, the analysis of global vehicle ownership per capita reveals significant regional variations, which can impact the adoption and growth of automotive usage-based insurance (UBI). As per the automotive usage based insurance industry analysis, according to February 2024 data, in North America, the United States leads with 860 vehicles per 1,000 people, indicating a mature automotive market with high penetration rates. Canada follows with 707 vehicles per 1,000 people. The high vehicle density in these regions presents a favourable environment for UBI adoption, as insurers can leverage extensive telematics data to offer personalized premiums based on driving behavior.

Europe shows diverse trends, with Poland experiencing rapid growth, reaching 761 vehicles per 1,000 people, nearly tripling its vehicle count since 2000. This rapid motorization can drive demand for UBI as consumers seek cost-effective insurance solutions tailored to their specific driving habits, boosting the growth of the automotive usage based insurance industry. In contrast, countries like Bulgaria and Ukraine have low or negative motorization growth rates, suggesting slower UBI market potential due to lower vehicle ownership.

In Asia, New Zealand leads with 869 vehicles per 1,000 people, followed by Australia with 737 vehicles. Japan, Malaysia, and South Korea also show significant vehicle ownership, indicating a strong market for UBI, especially as these countries are technologically advanced and have high consumer awareness. China, with 223 vehicles per 1,000 people, demonstrates a fast-growing market.

In Central and South America, Argentina leads with 311 vehicles per 1,000 people, but economic challenges like high inflation could hinder growth in vehicle ownership and UBI adoption, impacting automotive usage based insurance industry revenue. In Africa, Libya has the highest vehicle ownership at 490 per 1,000 people, while other countries like Morocco and South Africa have much lower rates. The automotive markets in these regions are still developing, presenting long-term opportunities for UBI as vehicle ownership increases.

Personalisation Benefits, Cost Savings, Technological Integration, and Regulatory Support, Aid the Growth of the Automotive Usage Based Insurance Market.

• UBI allows insurers to offer personalized premiums based on actual driving behavior, which can lead to more accurate risk assessment and pricing.
• UBI programs often result in lower premiums for safe drivers, encouraging better driving habits and reducing accident rates.
• The adoption of telematics and IoT in vehicles enhances data collection and analysis, enabling more efficient and effective UBI services.
• Governments in various regions are increasingly supportive of UBI models as they align with broader goals of road safety and environmental sustainability, increasing automotive usage based insurance market value.

Cybersecurity Risks, Technological Obsolescence, and Data Accuracy Can Challenge the Automotive Usage Based Insurance Market Growth.

• The reliance on digital platforms for data collection and transmission makes UBI systems vulnerable to cyberattacks, which could compromise customer trust.
• Differing regulations across regions can complicate the implementation and scaling of UBI programs, especially in countries with strict data privacy laws.
• As more insurers adopt UBI models, the market could become saturated, leading to intense price competition and margin pressures.
• Rapid advancements in vehicle technology and data analytics could render existing UBI systems outdated, requiring continuous investment in upgrades.
• The continuous monitoring required for UBI raises significant privacy issues, potentially deterring some customers and affecting automotive usage based insurance demand forecast.
• Implementing UBI requires significant investment in technology, data management, and customer education, which can be a barrier for smaller insurance companies.
• The accuracy of the data collected via telematics devices can be compromised by technical issues, leading to disputes between insurers and policyholders.
• Despite its advantages, UBI still faces challenges in widespread adoption, particularly in regions with low telematics penetration or resistance to change from traditional insurance models.

Expanding Market, Partnerships with Automakers, and Sustainability Initiatives Provide Opportunities to the Automotive Usage Based Insurance Market.

• Growing awareness of the benefits of UBI and increased adoption of connected cars provide significant growth opportunities.
• Collaborations between insurers and vehicle manufacturers can streamline the integration of UBI systems into new vehicles, boosting market reach and automotive usage based insurance market revenue.
• UBI aligns with global sustainability goals by promoting fuel-efficient driving and reducing carbon emissions, making it attractive to environmentally conscious consumers.
• Insurers can explore new revenue streams by monetizing the vast amounts of driving data collected through UBI programs.

Read more about this report - REQUEST FREE SAMPLE COPY IN PDF

Automotive Usage Based Insurance Industry Segmentations

By package, the market is segmented into:

• Pay-As-You-Drive (PAYD)
• Pay-How-You-Drive (PHYD)
• Manage-How-You-Drive (MHYD)

By vehicle type, the market is divided into:

• Passenger Vehicles
• Light Commercial Vehicle
• Heavy Commercial Vehicle

By technology, the market is classified into:

• Black Box
• Smartphone
• Embedded Telematics
• On-Board Diagnostics (OBD)
• Others

By region, the automotive usage based insurance market is segmented into:

• North America
• Europe
• Asia Pacific
• Latin America
• Middle East and Africa

Automotive Usage Based Insurance Market Share

The demand for Pay-As-You-Drive (PAYD)is expected to grow at a CAGR of 24.0% in the forecast period. This model calculates premiums based on the actual distance a vehicle travels, offering a personalised approach to auto insurance. Individuals who drive less can benefit from lower premiums, making PAYD an attractive option for those seeking cost-effective insurance solutions which can increase automotive usage based insurance market opportunities.

Moreover, the integration of telematics and data analytics enables accurate tracking of vehicle usage, facilitating the implementation of PAYD models.

Competitive Landscape

The report presents a detailed analysis of the following key players in the market, looking into their capacity, and latest developments like capacity expansions, plant turnarounds, and mergers and acquisitions:

• Allianz SE
• TomTom International B.V.
• Vodafone Automotive S.p.A
• Assicurazioni Generali S.p.A.
• Travelers Indemnity Company
• Esurance Insurance Services, Inc.
• Trak Global Group
• AXA S.A.
• Others

Read more about this report - REQUEST FREE SAMPLE COPY IN PDF

Automotive Usage Based Insurance Market Regional Insights

North America accounts for a substantial automotive usage based insurance market share and is expected to grow at a CAGR of 24.8% in the forecast period. The US market is expected to grow at a CAGR of 24.4% between 2024 and 2032. The growth is propelled by the widespread acceptance of connected vehicle technology and high car ownership rates. Collaborations between telematics providers, insurance companies, and Original Equipment Manufacturers (OEMs) further fuel this expansion.

Asia-Pacific is anticipated to exhibit high growth rate during the forecast period. The markets in India, China, and Japan are anticipated to grow at a CAGR of 25.3%, 21.1%, and 13.2% between 2024 and 2032. Factors such as the proliferation of mobile connectivity, smartphone technology, and increasing sales of telematics-equipped vehicles drive this growth.

Competitive Factors in the Global Automotive Usage Based Insurance Market.

• The ability to integrate advanced telematics, IoT, and data analytics technologies into UBI offerings is a key competitive factor. 
• Companies that can assure customers of data privacy and security while delivering actionable insights from driving data are more likely to gain a competitive advantage.
• Strategic partnerships with automakers, telematics providers, and technology firms can enhance an insurer’s UBI product offerings, further increasing automotive usage based insurance demand growth. 
• Offering unique or enhanced UBI features, such as real-time feedback to drivers, rewards for safe driving, or customizable insurance packages, can differentiate a company’s products from those of competitors.
• Providing a superior customer experience, including user-friendly mobile apps, transparent pricing, and responsive customer service, is a significant competitive factor. 
• Insurers that can offer lower premiums without compromising profitability, possibly through cost-efficient operations or advanced risk assessment techniques, have a competitive advantage.
• A strong market presence and diversified distribution channels, including digital platforms, insurance brokers, and partnerships with car dealerships, are crucial for capturing market share. 
• The reputation of an insurance brand, particularly in terms of trustworthiness, claims processing efficiency, and reliability, plays a critical role in the UBI market. 
• Adherence to local and international regulations, including data privacy laws and insurance industry standards, is essential for competitive positioning. 
• Continuous investment in research and development to innovate UBI products and services is a key competitive factor.

Key Price Indicators of the Global Automotive Usage Based Insurance Market.

• The cost of telematics and IoT devices, as well as the associated data management infrastructure, is a significant factor influencing the pricing of UBI policies. 
• The efficiency of data processing and the complexity of analytics required to accurately assess risk affect UBI pricing. 
• In a highly competitive market, insurers may lower prices to attract more customers, while in a less competitive market, prices might be higher, affecting the demand of automotive usage based insurance market.
• Historical data on the frequency and severity of claims for UBI policyholders impacts pricing. 
• Regulatory requirements that mandate minimum coverage or impose limits on pricing flexibility can directly influence UBI pricing.