Usage-based Insurance (UBI) Market Analysis

Usage-based Insurance Market Analysis

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The market is divided into OBD-II, Black Box, Smartphone, and Embedded telematics. In 2023, OBD-II accounted for over 49% of the market share. Given the rising popularity of connected cars and the subsequent surge in driver data, telematics technology has become pivotal. It empowers insurance providers to tap into this wealth of information, covering driving patterns, maintenance needs, and overall vehicle performance. As the adoption of connected car technologies escalates, the next wave of vehicles is poised to feature integrated data connections. These connections will furnish insurers with extensive usage and location data, instrumental in crafting Usage-Based Insurance (UBI) policies and initiatives.
 

For instance, in November 2022, CerebrumX announced a partnership with Ford to enable usage-based insurance (UBI) solutions. This collaboration aims to leverage connected vehicle data to provide personalized insurance offerings based on individual driving behaviors, enhancing the overall insurance experience for consumers. The partnership will utilize telematics data collected from Ford vehicles, allowing insurers to assess driving habits in real-time. This data will help in determining insurance premiums based on users’ driving frequency and behaviour.
 

The usage-based insurance market is categorized into passenger vehicle, and commercial vehicle. Passenger vehicle is expected to reach over USD 285.9 billion by 2032. Passenger vehicle is the most frequently used vehicle type by private individuals and constitute a large part of the automotive market. This higher level of ownership generally leads to a greater number of UBI products aimed at individual drivers. The UBI model, which uses telematics data to evaluate driving behavior, is particularly suitable for passenger vehicles where transportation patterns can be effectively monitored and analyzed.
 

This allows insurers to tailor premiums to specific driving characteristics such as speed, braking, and mileage, which are more relevant to passenger cars rather than commercial vehicles or fleets. For instance, in March 2021, Hyundai launched a usage-based insurance (UBI) program that allows customers to potentially save money on their auto insurance premiums based on their driving behavior.
 

The UBI program relies on travel-time data and driving-behavior data using vehicle sensors and Hyundai's Blue Link telematics. The program aligns with Hyundai's broader strategy to enhance the in-car experience and embrace car users through its Hyundai Connected Mobility initiative, which aims to offer personalized experiences and value-added services through mobility, connected cars, and data services.
 

North America holds a significant share, accounting for over 40% of the usage-based insurance market in 2023. The demand for UBI insurance in the region is growing rapidly, due to increasing customer demand for personalized insurance and telematics infrastructure. For instance, in February 2022, Mercury Insurance made its usage-based insurance (UBI) app available to drivers in New Jersey. This initiative allows policyholders to potentially lower their insurance premiums based on their driving habits.
 

In Asia Pacific, the market is booming, driven by increased traffic and advances in telematics technology. Countries such as China and India have been achieving rising profits, owing to improved infrastructure and controlled subsidies. However, limitations such as privacy issues and different technology usage patterns affect the growth of the market.
 

UBI for South America and the Middle East is expected to grow impressively between 2021 and 2032. This is due to the continued rise in telematics solutions to expand telecom insurance programs in the UAE, Brazil, Argentina, and South Africa. Telematics solution providers contract with insurance companies to provide telematics insurance solutions.
 

Further, the growth of connected cars in the region is expected to drive growth in the market. Since connected cars are equipped with the latest technology and sensors, automakers and insurance companies can easily collect driving data to analyze risks and provide new and better insights. improved offers. This will lead to a rapid increase in sales of new insurance policies and materials, expanding the market.
 

For a few past years, the UAE has been heavily investing in vehicle safety, due to the growing number of vehicles due to growing tourism and immigration. Considering the growing demand for vehicles and its insurance in UAE, Beema, a Dubai-based insurance innovator, January 2022, launched a usage-based car insurance program called "Beema SmartDriver" that rewards users for safer and more responsible driving. This is the first product of its kind in the UAE market and can be purchased and activated online through Beema's mobile app.