The usage-based insurance market is projected to reach $66.8 billion in 2026, from an estimated $19.6 billion in 2021, growing at a CAGR of 27.7% over the forecast period. The growing adoption of telematics and connected car services is expected to drive the usage-based insurance market. The launch of several UBI packages in countries such as India and South Africa is expected to further boost its popularity.
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UBI providers can work directly with OEMs to capitalize on the growing trend of connected cars in both developed and 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.
How You Drive Management or MHYD is estimated to be the fastest growing usage-based insurance market. MHYD is an extended version of PHYD, which provides feedback to drivers on areas for improvement beyond just rating them on driving behavior. This model is ideal for young drivers aged between 18 and 25 years, as they are new drivers. The MHYD system collects various driving behavior information such as hard braking, sharp turns and excessive speed to assess the driver. The system also suggests driver improvements to help improve driver behavior and reduce driver insurance premiums. UBI companies can work closely with telematic device manufacturers, insurers and OEMs to develop MHYD plans that meet the needs of different customers.
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The smartphone is designed to be the fastest growing segment of the insurance market based on usage, by technology. Using a smartphone for UBI services offers multiple advantages, such as flexibility, accurate information about driver behavior, etc. Smartphones are now equipped with a series of sensors that can collect data for telematic analysis. A smartphone is a cost-effective option for UBI services as the user does not need to purchase an external hardware device and no vehicle installation is required. Therefore, the system can be implemented quickly without any additional hardware requirements. Thus, smartphone technology is expected to see a sharp rise.
According to MarketsandMarkets, Asia Pacific is considered the fastest growing market for usage-based insurance during the forecast period. Market growth in this region can be attributed to the growing adoption of telematics and the growing trend towards car and ride sharing in developing countries such as India, Malaysia, Australia and Japan. Japan dominates the market in 2020 and is expected to continue its dominance over the forecast period due to significant developments in connected and autonomous vehicles and the growing adoption of telematics services.
Thus, the growing adoption of telematics in LDVs and HDVs, and the growing awareness of UBI packages should be the main reasons for the growth of UBI. COVID-19 spurred the adoption of UBI in several countries. The growing popularity of mobile telematics, OBD-II, is also expected to drive the market.
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