Automotive Usage Based Insurance Market Size, Share & COVID-19 Impact Analysis, By Type (Pay-How-You-Drive (PHYD), Pay-As-You-Drive (PAYD), Manage-How-You-Drive (MHYD)), By Technology Type (Smartphone, Embedded System, Black Box, Other Technologies), By Vehicle Type (Passenger Cars, Commercial Vehicles) and Regional Forecasts, 2021-2028

The global automotive usage based insurance market size was USD 28.27 billion in 2020. The global impact of novel coronavirus disease 2019, has been unprecedented and staggering, with automotive UBI witnessing a negative demand shock across all regions amid the coronavirus crisis. Based on our analysis, the global market exhibited a steady growth of 1.02% in 2020. The market is projected to grow from USD 31.21 billion in 2021 to USD 119.68 billion in 2028 at a CAGR of 21.2% over the forecast period. The sudden rise in Compound Annual Growth Rate (CAGR) is attributable to this market’s growth and demand, returning to pre-pandemic levels once the crisis is over.

Automotive Usage Based Insurance (UBI) uses the latest machine-to-machine technology and in-car devices to capture real-time driving information. Rather than simply relying on claim history or demographics, this enables insurers to set and adjust premiums based on an individual’s driving behavior. For drivers, insurance rates and assessed risks will be based entirely on their driving behavior, and safe driving allows for lower premiums. For insurers, UBI increases profitability and accuracy with premiums and policies accounting for actual risk. These factors will influence the growth of the market.

COVID-19 has Accelerated Consumer Adoption of Automotive Usage Based Insurance

The pandemic had a huge impact on driving habits in 2020. With shelter-in-place orders, the prevalence of work-from-home arrangements, and countless businesses closed, average miles driven decreased significantly.For instance, according to the Federal Highway Administration, in the U.S., the average number of miles driven decreased by 41% at one point.

Shortcomings in current insurance models have been highlighted as the pandemic caused a sharp decline in vehicles on the road. Although many insurers have offered rebates on monthly premiums to compensate for reduced mileage and accident risk, these discounts don’t reflect the magnitude of traffic reduction. The price sensitivity and economic uncertainty caused by the pandemic may lead to more switching to policies based on miles driven. A survey conducted by Bain & Company found that 21% of respondents have already purchased UBI, and 56% said they would likely purchase it in the future.

Similarly, in May 2020, the company re-ran a 2019 survey with more than 1,000 licensed drivers to determine how many drivers would be comfortable using typical telematics variables to set insurance premiums. About 50% of drivers (as opposed to 30%-40% in 2019) were comfortable with having their insurance adjusted based on speeding, distracted driving, where they drive, time of day they drive, and miles driven. This represents a year-over-year increase of more than 12%.

Furthermore, according to Arity, each year, on average, around 40% of drivers shop for auto insurance. However, with increased interest in reducing household costs, more people are likely to switch to personalized UBI policies. Hence, the pandemic has accelerated the shift to automotive UBI policies.

LATEST TRENDS

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Innovative Marketing Strategies to Augment Growth

As a way to accelerate industry shift, key players are testing several strategies to sell users on the value proposition of UBI programs. In October 2020, Metromile, a pay-per-mile carrier, launched Ride Along. Without changing carriers, it allows potential policyholders to test whether or not their rates will change under a UBI plan. After two weeks of driving with the Ride Along with the app, if they are satisfied by the plan's benefits, they have the option to sign on for Metromile. Hence, an increase in innovative marketing strategies will positively influence the adoption of automotive UBI policies.

DRIVING FACTORS

Safety and Economic Savings to Drive Growth of Market

With UBI, insurers can transform their customer relationship management with regular reports, advice, and tailored monthly bills instead of a once-a-year relationship based on renewals. By providing drivers greater transparency and control over costs, insurers can increase brand loyalty, improve customer retention, and secure new business.

Automotive usage based insurance can also help assess risk more accurately, price it into policies and optimize and minimize exposure. This ensures that insurers always have margins on their policies and highlights the type of new customers they should target. Even for customers who haven’t signed up for automotive usage-based insurance, risk profiles can also be refined by aggregate driving data. Hence, benefits of usage based auto insurance such as increasing consumer retention, boosting profitability, and streamlining the claims process will propel the automotive usage based insurance market growth.

Increasing Consumer Acceptance of UBI to Augment Growth

Willis Towers Watson conducted a survey of U.S. consumers, in which 81% of usage based insurance policyholders indicated that it is a positive experience, with only 4% suggesting a negative experience. Additionally, most drivers (63%) suggested that automotive UBI is a fairer way to calculate insurance premiums than conventional risk factors, with only 7% of consumers disagreeing. Furthermore, according to the survey, four out of five drivers are also open to sharing their recent driving data for personalized insurance quotes. Hence, increasing consumer acceptance of UBI will drive the growth of the market

RESTRAINING FACTORS 

Security and Privacy Concerns to Restrain Adoption of Automotive Usage Based Insurance

Data privacy & security is a major concern for consumers, with many recent examples of data breaches globally. For example, the Premera Blue Cross network hack in 2015, in which the breach was undetected for nearly nine months. The advanced persistent threat attack exposed the protected health information of more than 10.4 million individuals, including their bank account information, social security numbers, email addresses, names, and health plan clinical information. In September 2020, it led to the USD 6.85 million settlement (the second-largest settlement for HIPAA violations). Hence, these factors will restrain the growth of the market.

SEGMENTATION

By Type Analysis

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Pay-As-You-Drive Expected to Dominate the Market Owing to Total Low Cost

By type, the market is segmented into pay-how-you-drive (PHYD), pay-as-you-drive (PAYD), and manage-how-you-drive (MHYD).

The PAYD segment held the largest share of the market. PAYD is economically beneficial to customers with short commutes. It encourages drivers to reduce overall mileage, helping to reduce crashes (reducing claims and total cost of insurance) and reduce driving (leading to lower miles driven on congested roadways). These factors are fueling the dominance of this segment.

The PHYD segment is anticipated to grow at a faster pace during the forecast period. As it uses real-time driving data such as cornering, speed, and distracted driving, among others, to more accurately price premiums. Furthermore, the PHYD structure offers substantial discounts and consistent rewards for good driving behavior. These factors are fueling the adoption of PHYD among customers.

Further, the MHYD segment is expected to be the fastest-growing market. Thus, the model offers feedback to automobile owners on improvement areas rather than just ranking them on driving behavior patterns. The manage-how-you-drive system model works like pay-how-you-drive model by collecting several driving behavior information such as overspeeding, sharp cornering, and harsh braking to rate the driver. Moreover, The evolution of data analytics technology is anticipated to help the MHYD segment to gain momentum over the forecast period.

By Technology Type Analysis

Embedded Systems Held the Largest Share of the Market Owing to Increasing Adoption by OEMs

Based on technology type, the market is segmented into smartphones, embedded systems, black box, and other technologies.

The embedded system segment held the largest share of the market. This system offers several benefits to OEMs, such as product differentiation, the potential to offer value-added services, and improved customer relationship management. Furthermore, in the event of product recalls, they can also lead to potentially lower costs. Hence, these factors are responsible for the increasing adoption of embedded systems by major automobile manufacturers.

The smartphone segment of this market is expected to exhibit a higher CAGR during the forecast period owing to the low implementation complexity and low overall cost. Furthermore, smartphone apps tend to be fully configurable and modular and facilitate additional development owing to open platforms. These factors will fuel the growth of this segment. Moreover, black box is the traditional form of usage based insurance technology broadly preferred by automobile owners. It captures a broad range of data and is very accurate. Further, the growing use of telematics insurance in UBI for medium- and heavy-duty vehicles is expected to increase the demand for the black box in the coming years.

By Vehicle Type Analysis

Passenger Cars Segment Dominated the Market in 2020 Owing to Substantial Economic Benefits

Based on vehicle type, the market is segmented into passenger cars and commercial vehicles.

The passenger car segment dominated the market in 2020. The increasing consumer demand for lower premiums, substantial discounts for signing up, and availability of additional services such as remote vehicle control and theft protection at a low overall cost are responsible for the increasing adoption of UBI in this segment.

The commercial vehicles segment is expected to grow at a faster pace. This can be attributed to the increasing adoption of UBI among fleet owners. With UBI, overall profits increase, and the total cost of ownership is reduced as fleet owners can offer value-added services. Furthermore, the reputation of drivers is extremely important to the company’s success. Hence, receiving feedback on their drivers (regarding driving behavior) is a welcome proposition for fleet owners. These factors will propel the growth of this segment.

REGIONAL INSIGHTS

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North America dominated the market (with the U.S. accounting for most of the market share) and is valued at USD 11.91 billion in 2020. This can be attributed to the increasing adoption of Mobility-as-a-service and increasing collaborations between OEMs and insurance and telematics technology companies in this region.

Asia Pacific is anticipated to exhibit a higher CAGR during the forecast period. This can be attributed to the proliferation of mobile connectivity and smartphone technology and increasing sales of telematics-equipped vehicles in this region. Furthermore, the presence of robust telecommunications infrastructure and mobile communications technology and rapid expansion of the Internet of Vehicles network in countries such as South Korea and China is driving the growth of the market.

Europe is also expected to show significant growth in the market due to substantial regulatory support regarding the adoption of vehicle telematics. For instance, in 2017, Italy implemented a law that requires insurance carriers to install telematics devices in all automobiles and set premiums based on the real-time data obtained from these devices.

Similarly, the eCall system and ERA-GLONASS are mandatory for passenger cars and freight vehicles across the European Union and Russia. These systems rely on a range of telematics devices that can use real-time driving data to provide emergency assistance and monitor driving behavior, among other functions. Hence, these factors will boost the adoption of automotive usage based insurance in this region.

KEY INDUSTRY PLAYERS

Progressive Corporation is a Leading Players in Market Owing to Productive Partnerships and Industry-Leading Products

The Progressive Corporation is the leading player in the global automotive UBI market owing to successfully promoting early adoption of their UBI programs, especially in North America. For instance, Progressive has over 25 Billion miles logged through Snapshot (its UBI program) and roughly 19,000,000 policies in force. Furthermore, the company is also actively engaging in productive partnerships such as the telematics R&D agreement with Generali in 2016. These factors are attributed to Progressive’s leading position in the market.

LIST OF KEY COMPANIES PROFILED:

• Allstate Insurance Company (Illinois, U.S.)


• State Farm Mutual Automobile Insurance Company (Illinois, U.S.)


• Liberty Mutual Insurance (Massachusetts, U.S.)


• AXA (Paris, France)


• The Progressive Corporation (Ohio, U.S.)


• Allianz (Munich, Germany)


• American International Group, Inc. (AIG) (New York, U.S.)


• MAPFRE (Madrid, Spain)


• Assicurazioni Generali S.P.A. (Trieste, Italy)


• Insurethebox (London, U.K.)


• Verisk Analytics, Inc. (New Jersey, U.S.)


• Arity, LLC (Illinois, U.S.)


• TrueMotion, Inc. (Massachusetts, U.S.)


• Insurance & Mobility Solutions (IMS) (Ontario, Canada)

KEY INDUSTRY DEVELOPMENTS:

• December 2020 – Progressive Corporation introduced Snapshot ProView, a voluntary UBI and fleet management program for small business owners. Many customers will save 8%, and some can even save up to 18%, for their initial term based on vehicle type and nature of business use.


• December 2020 – IMS announced that Berkshire Hathaway GUARD Insurance Companies selected the company for a new commercial fleet insurance program, TrackMRI (Monitor, React, Improve).

REPORT COVERAGE

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The global automotive usage based insurance market research report covers a detailed analysis of the market and focuses on key aspects such as leading companies, product types, and leading applications of the product. Besides this, the report offers insights into the market trends and highlights key industry developments. In addition to the aforementioned factors, the report delivers an in-depth market analysis of several factors that have contributed to its growth over recent years.

Report Scope & Segmentation