Usage-based Insurance Market worth $95.81 billion by 2025
The Usage-Based Insurance Market for automotive is estimated to be USD 28.43 billion in 2018 and is projected to reach USD 95.81 billion by 2025, at a CAGR of 18.95% from 2018 to 2025. The increasing number of vehicles with telematics and connected car services and a reduction in insurance premiums as compared to regular insurance are projected to drive the usage-based insurance market
Technology start-ups to play an important role in the usage-based insurance ecosystem
In the current market scenario vehicle insurance is dominated by larger insurance companies providing regular vehicle insurance. As the momentum shifts towards usage-based insurance models such as pay-as-you-drive and pay-how-you-drive, the integration of technology with the regular insurance model becomes very integral. Usage-based-insurance heavily depends on telematics to capture driver data and analyses driving behavior to calculate insurance premiums. This is where multiple start-ups and new companies have come into the picture who have been working towards various technological aspects of usage-based insurance.
Start-ups have been integrating technologies such as, Internet of things, artificial intelligence and blockchain to the usage-based insurance platform to tackle issues of fraud claims, ease of payments, and transparency in transactions and increasing the overall efficiency of the UBI system.
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The changing personal mobility scenario to further drive the demand for usage-based insurance and encourage safe driving
The scenario of modern mobility is changing as the customer preference towards owning and using personal vehicle is shifting towards shared mobility. As ride-hailing services are becoming more and more popular, people in developed regions of the world are using less of their own vehicles. Hence usage-based insurance becomes a feasible option for people who don't use their vehicles much as their insurance premiums reduced considerably. Additionally, plans such as pay-how-you-drive encourage drivers to practice safe driving as the premium increases if instances of rash driving take place, hence making the roads safer.
Pay-As-You-Drive (PAYD) package type is projected to have the largest market in the usage-based insurance market
Pay-As-You-Drive (PAYD) package type is estimated to be the largest market for usage-based insurance, by package type, during the forecast period. Various factors affecting the dominance of PAYD are ease of deployment, no complex algorithms for working, and cost-effectiveness for the insurer as well as consumers. Secondly, PAYD insurance encourages consumers to drive less and drive green. This reduces vehicle emissions and contributes to the worldwide environmental efforts. As people drive less, the accidental risks associated with drivers reduce.
Americas to lead the usage-based insurance market
The Americas region is projected to be the largest market for usage-based insurance during the forecast period. The Americas has the highest adoption rate of usage-based insurance as compared to other regions owing to higher regular insurance premiums and high sales of premium D segment and light-duty vehicles. Apart from this, vehicles with telematics and connected car services are acting as a driving factor for the usage-based insurance market. In the Americas, the US is the leading country in the usage-based insurance market where light-duty vehicles are the leading vehicle type. The market for on-road vehicles is estimated to have the largest market share and for new vehicles is estimated to be the fastest in the Americas region.
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Market Dynamics
Drivers
Increasing adoption of telematics and connected cars
Reduction in insurance premium and risk-related costs
Increasing vehicle sales and parc
Restraints
Ambiguity over regulations and legislative environments
Opportunities
Automotive usage-based insurance ecosystem
Challenges
Data privacy
Lack of standardized systems
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