The usage-based insurance (UBI) market is experiencing strong growth across the globe. This can be attributed to a number of factors, including the COVID-19 pandemic, technological advancements such as in telematics and smartphones, and growth in connected cars.
Fact.MR recently conducted a survey1 covering the global UBI industry. The results found that the global market for UBI could reach as high as USD 150 billion by 2031. This is a sharp projected jump in ten years, as the estimated size of the UBI insurance market in 2021 was near USD 30 billion. Even with Covid-19 impacting automobile manufacturing, the UBI market continued to grow strongly. This sustained growth over turbulent times was largely in part to the rising popularity of electrical vehicles from manufacturers such as Tesla and Li Auto, as well as people staying at home in lockdowns and realising that they shouldn’t be paying the full insurance premium when they aren’t using their car.
The use of telematics technology in the UBI industry is critical. It is quickly becoming the most popular tool for insurance companies to provide accurate premiums to their policyholders. It provides insurance companies with in-depth data about an array of driver and vehicle performances. Insurers can identify the exact number of kilometres driven by their policyholders and even their average break and acceleration speeds. The introduction of telematics technology provides both insurers and policyholders with unparalleled transparency in car insurance policies.
This growing popularity is evident in the US, with a takeover of TrueMotion by Cambridge Mobile Telematics2. Cambridge Mobile Telematics now provides telematics services to nearly 85% of the top auto insurers in the US.
Usage insurance market segments
Within UBI exist several market segments. Below, you can explore the different areas of the UBI insurance market that are likely to contribute to this exceptional growth:
Policy types
The UBI industry involves varying policy types. Some are becoming outdated while others are penetrating markets across the globe. The key policy types expected to grow in the global usage insurance market are:
- Pay-as-you-drive (PAYD) car insurance policies
- Pay-how-you-drive (PHYD) car insurance policies
- Manage-how-you-drive (MHYD) car insurance policies
Products
Motor UBI products typically refer to the telematics and data recording technology that innovative policies utilise. These products allow insurers to collect vital information about vehicles to ensure accurate and fair premiums. The motor insurance products expected to grow with the global market are:
- OBD-Dongles
- Smartphone applications
- Black-boxes
Vehicles
The UBI industry covers a plethora of vehicles, from collectable cars to 400-tonne shipping vessels. However, some vehicle classes are contributing more to the global growth of the UBI industry. The classes of vehicles expected to contribute largely to the increase in market growth are:
- Passenger vehicles
- Commercial vehicles
Leading competitors in the international usage insurance market
Major players in the global UBI industry include, but are not limited to:
- Allianz SE
- Aviva plc
- UnipolSai Assicurazioni S.p.A
- Groupama
- Liberty Mutual Group
- Generali Group
- UNIQA Insurance Group AG
- Nationwide Mutual Insurance Company
- State Farm
- The Allstate Corporation
- Insure the Box Limited
- Cambridge Mobile Telematics
The importance of telematics
Telematics technology is paving the road for the UBI industry. Besides its technological benefits, such as instant and accurate data access, it’s also playing a role in the psychological habits of drivers. UBI policies benefit extensively from including telematics technology in their provision of service. Not only do the insurers benefit, but so can the policyholders. The policies essentially reward drivers for good driving practices. Thanks to telematics devices, like an OBD-Dongle, insurers can collect information that outlines the driving habits of their policyholders. This is a massive incentive for drivers to drive well.
Statistics show that drivers under a PAYD policy are in fewer accidents and are less likely to commit traffic violations. The benefits and evidence of opportunity in the UBI industry are high. Communities, insurers and policyholders all stand to benefit from the growing rise of telematics technology in UBI.
Conclusions
- As highlighted by reports such as that published by Fact.MR1, there is large expected growth in the global UBI market over the next decade
- In motor, PAYD policies are the preferred product by consumers, as they are forecast to comprise 55%1 of global UBI revenue.
- Telematics insurance products, enabled by OBD-Dongles, are becoming increasingly popular and may contribute extensively to the growth rate of UBI over the next 10 years.
There are large opportunities and benefits for a PAYD policy and to both insurers and policy holders. KOBA Insurance is leading the way in Australia in the motor UBI space by building a customer-centric solution based on real-time data to track distance travelled. Their transformation of the car insurance industry has just begun here in Australia, and here at Gateway Australia we are proud to have a role in making this vision a reality.
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