Usage Insurance Market Is Projected To Reach Nearly US$ 150 Billion By 2031

The global demand of the overall Usage Insurance market accounted for almost US$ 30 Bn in 2020 and is projected to reach nearly US$ 150 Bn by 2031, expanding 5x across the 2021-2031 forecast period.

Growing complexities in the one-size-fits-all approach associated with general automotive insurance is prompting increased uptake of usage based insurance, which are far more dynamic and accurate in nature. Demand for black box usage insurance is expected to remain most prominent, amid wider connectivity and higher accuracy.

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Overview of the Usage-Based Insurance Market

The usage-based insurance market has gained momentum as insurers seek innovative ways to assess risk accurately and offer competitive pricing to customers. Traditional insurance pricing models are often based on historical data and broad demographics, leading to disparities in premiums. UBI, on the other hand, leverages real-time data to evaluate individual driving behavior, enabling insurers to tailor rates more closely to the actual risk posed by each policyholder.

The implementation of telematics technology has been pivotal in the UBI market’s growth. Telematics devices, which can be installed in vehicles or accessed through smartphone apps, collect data on driving habits such as speed, braking, acceleration, and even the time of day a vehicle is used. This data is then transmitted to insurance companies for analysis, allowing insurers to offer discounts to safe drivers while appropriately pricing policies for those with riskier driving behaviors.

How are Good Driving Practices Paving Way for Usage Insurance?

Incentives for better driving habits will increase drivers’ motivation to improve their driving behavior. It leads to fewer traffic violations and accidents, resulting in fewer claims for insurance companies. This could prevent most drivers from paying more in rates and thus save them some money.

Implementation of tools for tracking drivers’ driving behavior through the use of telematics is acquiring significant traction. The adoption of various technologies, including odometers, smartphones, and OBD dongles, has profoundly affected the driving behavior of consumers.

The coverage provided by usage-based insurance can offer current and ongoing details about driving habits, enabling appropriate calculation of rates and discounts quickly. The maximum discount offered is 25 percent, but most drivers receive a five to ten percent discount after recording driving.

Key Segments Covered in the Usage Insurance Industry Survey

Policy Type

• Pay-how-you-drive(PHYD)
• Pay-as-you-drive(PAYD)
• Manage-how-you-drive(MHYD)

Product

• Black Box
• OBD Dongle
• Smartphone
• Others

Vehicle

• Passenger Vehicle
• Commercial Vehicle

Competitive Landscape

Strategic collaborations enable insurance industries to increase revenue and market share. New products and technologies will enable the growth of usage-based insurance in the insurance industry.

• To accelerate expansion across Europe, insurance tech company bolttech acquired i-surance, a next-generation B2B2C digital insurance platform. Boltech now covers 26 countries across North America, Asia, and Europe following the acquisition of i-surance – including Switzerland, Belgium, Germany, France, Liechtenstein, Monaco, Luxembourg, Netherlands, Portugal, Poland, Spain, and the United Kingdom.
• Bolttech intends to expand its insurance exchange services in Europe to provide both partners and customers with more choices.

Current Industry News and Trends

• Increased Adoption of Telematics Devices: In the past couple of years, there has been a surge in the adoption of telematics devices and smartphone apps by both insurers and policyholders. Consumers are becoming more comfortable with the idea of sharing their driving data in exchange for potential cost savings. This trend has led to a more competitive UBI landscape, with insurers rolling out innovative telematics-based products.
• Partnerships and Collaborations: Insurers have been forming partnerships with technology companies and automakers to expand their telematics offerings. These collaborations allow for seamless integration of telematics technology into vehicles, making it more accessible to a broader customer base. Additionally, partnerships with ride-sharing and car-sharing platforms have enabled insurers to offer UBI to a wider range of drivers.
• Behavior-Based Discounts: Many UBI programs have evolved beyond the basic tracking of driving habits to include behavior-based discounts. This means that policyholders who consistently exhibit safe driving behavior can enjoy increasingly lower premiums over time. Some insurers even offer rewards programs or cashback incentives for good driving behavior.
• Data Privacy Concerns: The increased collection of personal data through telematics devices has raised privacy concerns among consumers. Insurers are addressing these concerns by implementing strict data protection measures and being transparent about how the data is used. Data anonymization and encryption are becoming standard practices in the UBI industry.
• Integration with Autonomous Vehicles: As autonomous vehicles become more prevalent, there is a growing interest in integrating UBI with these vehicles. Insurers are exploring ways to adapt their pricing models to account for the reduced risk associated with self-driving cars. This could lead to more affordable insurance options for autonomous vehicle owners.
• Eco-Friendly Driving Incentives: Some UBI programs have started offering incentives for eco-friendly driving behaviors, such as reducing fuel consumption and emissions. These initiatives align with the global push for environmental sustainability and provide additional motivation for drivers to adopt greener practices.

Key players in the Usage Insurance Market

• Insure the Box Limited
• Allstate Insurance Company
• State Farm
• Uniqa Insurance Group AG
• Groupama
• Generali Group
• UnipolSai Assicurazioni S.p.A

Key Takeaways from the Market Study

• Global usage insurance market to surge 5x until 2031 as compared to 2021
• Demand for pay-as-you-drive (PAYD) to account for 55% of global market revenue
• Smartphone-based usage insurance likely to expand at a CAGR of 9% through 2031
• By vehicle, commercial usage insurance to garner significant momentum, growing at 7% CAGR
• U.S to capture half of the global usage insurance demand across the decade
• Europe likely to register an expansion rate of 10% in value CAGR terms through 2031
• Asia to account for a growth rate of a staggering 15% from 2021 to 2031

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