The global usage based insurance (UBI) market is projected to grow from USD 30.6 billion in 2023 to USD 80.7 billion by 2028, at a CAGR of 21.4%. The key factors driving the usage-based insurance market are the lower premiums charged compared to traditional insurance for the automotive, the government regulations imposed on adopting telematic devices, higher sales of connected cars, and increasing sales of on-road vehicles, which drive the UBI market.
Market Dynamics
DRIVER: Increasing adoption of telematics and connected cars.
Telematics has become commonplace in the automotive industry. Car telematics enhance driving behavior and road safety, and usage-based insurance (UBI) aligns insurance premiums. The Global System for Mobile Communications, or GSMA, predicts the telematics market will grow to USD 750 billion by 2030. The telematics sector is expanding for two main reasons. First, governments are becoming eager to impose telematics regulations, which is already happening in the European Union and Russia. Second, there is a growing need for automobiles to be more connected and intelligent. According to a whitepaper by LexisNexis Risk Solutions, between 80% and 90% of those who bought auto insurance in 2017 had telematics-enabled coverage. IMS (Intelligent Mechatronic Systems) forecasts that the vehicle telematics market will expand at 23–24% CAGR over the following several years due to increased regulatory regulations and technology penetration. Additionally, because of the rising demand for linked automobile services, insurance companies may assist clients in times of need, which speeds up the claims process and saves time. Consequently, the growing acceptance of connected car services would significantly impact the market for automobile usage based insurance.
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OPPORTUNITY: Developing automotive usage-based insurance ecosystem
A robust ecosystem is developing around connected car services as usage-based auto insurance demand skyrockets. Automotive insurance embedded telematics box and telematics providers, data platform and analytics firms, big data companies, and cloud service providers are some of the participants in this ecosystem. In a number of ways, insurance businesses are undergoing a digital transition. For instance, machine learning or predictive modeling technologies may replace the analytics capabilities of insurance firms. Additionally, traditional data sets comprising risk profiles based on claims history are being replaced by the increasing accessibility of real-time data collected from automobiles. The demand for linked automobile services, the expansion of automotive telematics, and mobile-based telematics will all present huge prospects for usage-based insurance market participants.
Asia Pacific is the fastest-growing market in the usage based insurance market.
Asia Pacific is estimated to be the fastest-growing region for the usage-based insurance market. The Asia Pacific region has some of the highest vehicle ownership rates in the world. This means a large pool of potential customers for UBI products. The UBI ecosystems in many Asia Pacific nations are partnering with some service providers for the UBI program. For instance, GrabTaxi from Singapore has collaborated with AXA to provide UBI insurance for all GrabTaxi drivers. The Asia Pacific region is also one of the fastest-growing regions regarding IoT technology. In the past 4-5 years, key countries like China, Japan, and India have rapidly adopted the IoT technology used by automotive OEMS present here.
Key Players
The UBI market is dominated by globally established players in North America, such as UnipolSai Assicurazioni S.p.A (Italy), Progressive Casualty Insurance Company (US), Allstate Insurance Company (US), State Farm Automobile Mutual Insurance Company (US), and Liberty Mutual Insurance Company (US).
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