The Usage-Based Insurance Market is projected to reach USD 66.8 billion by 2026 from an estimated USD 19.6 billion in 2021, growing at a CAGR of 27.7% during the forecast period. The increasing adoption of telematics and connected car services is expected to drive the usage-based insurance market. The rolling out of various UBI packages in countries such as India, South Africa is expected to further drive its popularity.
UBI providers can work directly with OEMs to capitalize on the increasing trend of connected cars in developed as well as developing regions. UBI service providers can also provide customized plans for embedded systems that can give incentives to connected car owners to choose UBI policies.
Usage-based Insurance Market Dynamics
Driver: Increasing adoption of telematics and connected cars
Telematics has merged into the automotive mainstream at a rapid rate. Car telematics helps improve driving behavior, road safety, and align insurance premiums via usage-based insurance (UBI). According to GSMA (Global System for Mobile Communications), the telematics industry is estimated to reach USD 750 billion by 2030. There are two major reasons for the growth of the telematics industry. First, the increasing willingness of governments to mandate telematics services such as emergency-call capabilities, which is already happening in the European Union and Russia. Secondly, the increasing demand for greater connectivity and intelligence in vehicles. According to LexisNexis Risk Solutions whitepaper, in 2017, 80%–90% of motor insurance purchasers had a telematics-enabled policy. According to IMS (Intelligent Mechatronic Systems), with improved governmental regulations and technology penetration, the automotive telematics market is expected to grow at a CAGR of 23–24% over the next few years. Also, due to the growing demand for connected car services, insurance providers can support customers when emergencies occur, leading to time savings and optimization of claims processes. Hence, the increasing adoption of connected car services will have a huge impact on the automotive usage-based insurance market.
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Light-Duty Vehicle (LDV) is expected to lead the market during the forecast period
Light-duty vehicles constitute passenger cars and light commercial vehicles. The adoption rate of UBI is higher in LDVs than HDVs. Light-duty vehicles can be easily fitted with OBD-II, black box, or other devices to access usage-based insurance plans. Additionally, as LDVs are generally driven by a single person, UBI plans based on driver behavior are ideal for this vehicle segment. Also, leading companies are developing various products and solutions for LDVs such as ride-sharing and autonomous vehicles. Thus, in the coming years, LDVs are expected to witness strong UBI penetration.
Smartphone segment is expected to be the fastest-growing market
According to MarketsandMarkets analysis, a smartphone is a fastest-growing segment, by technology, of the usage-based insurance market owing to the increasing popularity of mobile telematics. In the current market scenario, black box is widely used as it offers reliable data collection and has gained high customer acceptance. The major market is expected to be concentrated in North America and Europe owing to the presence of key players, affinity towards advanced automotive technologies, and relatively higher awareness of UBI than Asia Pacific.
Key Market Players:
The usage-based insurance market is dominated by globally established players such as UnipolSai Assicurazioni S.p.A (Italy), Progressive Casualty Insurance Company (US), Allstate Insurance Company (US), State Farm Automobile Mutual Insurance Company (US), and Liberty Mutual Insurance Company (US).
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