Automotive Usage Based Insurance Market Size, Share & COVID-19 Impact Analysis, By Type [Pay-As-You-Drive (PAYD), Pay-How-You-Drive (PHYD), and Manage-How-You-Drive (MHYD)], By Solution (Dongle, Black Box, Embedded, and Smartphones), By Vehicle Type (Passenger Cars and Commercial Vehicles), and Regional Forecasts, 2023-2030

The global automotive usage based insurance market size was valued at USD 50.35 billion in 2022. The market is projected to grow from USD 57.86 billion in 2023 to USD 174.33 billion by 2030, exhibiting a CAGR of 17.1% during the forecast period.

Unlike traditional insurance, automotive Usage Based Insurance (UBI) analyzes driving to calculate insurance premiums rather than a fixed amount. Driving behavior and the total driving distance are major in estimating vehicle insurance premiums. The insurance company gathers various data points related to speed, acceleration rate, breaking pattern, and driving behavior to decide insurance premiums.

There are numerous benefits of automotive usage based insurance. It keeps track of driving behavior, encourages better driving habits, and improves driving skills. It can aid in the recovery of stolen vehicles with the help of location tracking. Insurance companies can use vehicle telematics data to prevent fraudulent claims. This data is also useful to smoothen out the entire claim management and process, as inspection and verification become much easier with recorded data. Moreover, telematics information is extremely useful in accident investigation and in preventing future accidents.

COVID-19 IMPACT

COVID-19 is Expected to Drive Consumer Adoption Owing to increasing Adoption of Safety Measures

The pandemic had a huge impact on driving habits in 2020. In the initial months of 2020, the pandemic affected the business of automotive usage based insurance manufacturers due to lockdown restrictions. New customer orders were halted due to negative market sentiment; however, the market gained momentum in the last months of 2020 due to a shift in customer behavior dynamics.

With shelter-in-place orders, the prevalence of work-from-home arrangements, and countless businesses closed, average miles driven decreased significantly. For instance, as per the Federal Highway Administration, in the U.S., the average miles driven decreased by 41% at one point.

Shortcomings in current insurance models have been highlighted as the pandemic led to a sharp decline in vehicles on the road. Although many insurers have offered rebates on monthly premiums to compensate for accident risk and reduced mileage, these discounts don’t reveal the magnitude of traffic reduction. The economic uncertainty and price sensitivity caused by the pandemic may lead to more switching to policies based on miles driven. Furthermore, according to Arity, on average, around 40% of drivers shop for auto insurance each year. However, with increased interest in reducing household costs, more people are likely to switch to personalized UBI policies.

LATEST TRENDS

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Innovative Marketing Strategies to Augment Market Growth

As a way to accelerate the 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 (UBI application). 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 with the plan's benefits, they can sign on for Metromile. Hence, an increase in innovative marketing strategies will positively influence the adoption of usage based insurance policies. 

DRIVING FACTORS

Safety and Economic Savings to Drive the Market Growth

With automotive usage based insurance, 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, aggregate driving data can also refine risk profiles. Hence, the benefits of usage based auto insurance, such as increasing consumer retention, boosting profitability, and streamlining the claims process, will propel the market growth.

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, in April 2021, Geico, one of the largest automotive insurance providers, reported a cyber-attack. In this attack, hackers stole data regarding customers’ license numbers. In January 2023, the personal information of more than two million Aflac life insurance and Zurich auto insurance policyholders was leaked in a third-party data breach. Such incidents may affect the market growth.

SEGMENTATION

By Type Analysis

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Pay-How-You-Drive to Dominate Due to its Advanced Capturing Features for all Insurance

By type, the market is segmented into Pay-As-You-Drive (PAYD), Pay-How-You-Drive (PHYD), and Manage-How-You-Drive (MHYD).

The PHYD segment is expected to capture majority of the automotive usage based insurance market share during the forecast period as it uses real-time driving data such as cornering, speed, and distracted driving to price premiums more accurately. Furthermore, the PHYD structure offers substantial discounts and consistent rewards for good driving behavior. These factors fuel the adoption of PHYD among customers.

The PAYD segment will capture a considerable market share within the forecast period. 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.

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 the 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 drive the MHYD segment to gain momentum over the forecast period.

By Solution Analysis

Smartphones Held Majority of the Market Share owing to Ease of Accessibility

Based on solution, the market is segmented into dongle, black box, embedded, and smartphones.

Nowadays, smartphones are linked to vehicles and can transmit information to users. These devices will play a pivotal role in vehicle telematics insurance as they are embedded with various sensors, including GPS, gyroscopes, and accelerometers. These devices are integrated with the cloud with large storage capacity. In addition, they have superior computing power, which aids in minimizing data handling and storage costs. The abovementioned factors will drive the segment’s growth over the forecast period.

Black box is professionally installed and is one of the safest and most reliable solutions in this industry. These devices are extremely popular in Europe and can be used for Pay-As-You-Drive (PAYD) and Pay-How-You-Drive (PHYD). These devices are integrated with accelerometers to track speed, and g-forces. It is connected to the vehicles’ electronic control unit to access sensors. It offers early intimation and valuable information in case of theft and accident. Moreover, these devices can track driving behavior and store information efficiently.

By Vehicle Type Analysis

Passenger Cars Segment Dominated the Market in 2022 owing to Substantial Economic Benefits

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

The passenger cars segment dominated the market in 2022. 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 automotive usage based insurance in the passenger cars segment.

The commercial vehicles segment’s growth can be attributed to the increasing adoption of automotive usage based insurance among fleet owners. With this insurance, overall profits increase and the total cost of ownership is reduced as fleet owners can offer value-added services. Furthermore, drivers' reputation 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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Geographically, the market is studied across Asia Pacific, North America, Europe, and the Rest of the World.

North America dominated the automotive usage based insurance market share and was valued at USD 23.34 billion in 2022. This can be attributed to the increasing adoption of Mobility-as-a-service and increasing collaborations between OEMs and insurance and telematics companies in North America.

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

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 various 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 this region's automotive usage-based insurance.

KEY INDUSTRY PLAYERS

Increasing Popularity of Automotive Usage Based Insurance will Create High Degree of Competition in the Market

Allstate Insurance Company, AXA, State Farm Mutual Automobile Insurance Company, Liberty Mutual Insurance, Allianz, the Progressive Corporation, the Progressive Corporation MAPFRE, and Insurethebox are the key players in the market. These manufacturers are implementing novel attractive programs, collaborating with vehicle manufacturers, and investing in promotional campaigns to gain majority of market share. For instance, in February 2022, State Farm Mutual Automobile Insurance collaborated with Ford to introduce usage based insurance to new vehicle owners.

LIST OF KEY COMPANIES PROFILED:

• Allstate Insurance Company (U.S.)


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


• Liberty Mutual Insurance (U.S.)


• AXA (France)


• The Progressive Corporation (U.S.)


• Allianz (Germany)


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


• MAPFRE (Spain)


• Insurethebox (U.K.)


• Verisk Analytics, Inc. (U.S.)


• Arity, LLC (U.S.)


• Insurance & Mobility Solutions (IMS) (Canada)

KEY INDUSTRY DEVELOPMENTS:

• March 2023 – Liberty Mutual Insurance partnered with Ford to bring usage based insurance to connected vehicles.


• February 2023 – Verisk Analytics Inc. renewed an agreement with Hyundai Motor America to analyze telematics data from Hyundai and Genesis vehicles.


• July 2022 – Bajaj Allianz launched usage based insurance cover add-on cover – Pay As You Consume (PAYC). They claimed that they are the first to launch this type of insurance under the Insurance Regulatory and Development Authority of India (IRDAI) that permits add-on sophisticated insurances for motor companies.


• May 2022 – Liberty Mutual Insurance completed the acquisition of technology assets of Insurance Portal Services (Fetch). This acquisition helped Liberty insurance company to use embedded capabilities of insurance for the automotive industry.


• December 2020 – The Progressive Corporation introduced Usage-Based Insurance and Fleet Management Program for small business owners.

REPORT COVERAGE

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The 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, 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 contributed to the market growth in recent years.

Report Scope & Segmentation