Wednesday, October 24, 2018

The analysts forecast the global usage-based insurance market to grow at a CAGR of 18.95 % during the period 2018-2025



The usage-based insurance market for automotive is estimated to be USD 28.43 billion in 2018 and is projected to reach USD 95.81 billion by 2025, at a CAGR of 18.95%. The growing market for connected cars services, increasing regular vehicle insurance, and increased customer acceptance of connected services will drive the market for usage-based insurance.

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Usage-based insurance providers should focus on open platforms for integration of any application. For instance, Octo Telematics launched its Next Generation Platform (NGP), a business and technology investment of more than USD 40 million. The platform provided open access and seamless integration of any Application Programming Interface (API) as well as a fully-modular insurance telematics structure, offering flexibility through mix-and-match service selection. The development of the platform as an IoT ecosystem provided innovators the scope and ability to meet the rapidly growing global demand for user-based insurance. Hence, usage-based insurance providers should focus on such platforms having huge market demand across the world, especially Europe and the Americas.

Manage-how-you-drive or MHYD is the fastest growing usage-based insurance market by policy type. MHYD is an extended version of PHYD which provides feedback to drivers on improvement areas besides just ranking them based on driving behavior. This model is very much applicable for young drivers aged between 18 and 25 as they are inexperienced. The MHYD system works similar to a PHYD by collecting various driving behavior information such as harsh braking, sharp cornering, and overspeeding to rate the driver. The system also suggests improvements to the driver to help improve the driving behavior and ultimately reduce insurance premium. UBI companies can work together with telematics device manufacturers, insurance companies, and OEMs to develop MHYD plans that suit the requirements of different customers.


Embedded system is projected to be the fastest growing usage-based insurance market by technology. Embedded refers to the use of inbuilt vehicle telematics to analyze and offer UBI services. With the growth in vehicle technology, connected cars are becoming prevalent. Connected cars offer various features which enable the use of telematics and infotainment services using the telematics device (telematics control unit). The inbuilt telematics is used to collect vehicle data and analyze the driving behavior to calculate insurance premiums. Embedded telematics is very accurate at capturing vehicle data as it is an integrated part of the system and does not require external calibration to register data. UBI providers can work directly with OEMs to capitalize on the increasing trend of connected cars in developed regions like the Americas and EME and also in developing markets such as Asia Oceania where the penetration of connected cars with embedded systems is increasing rapidly. UBI service providers can also provide plans specific for embedded systems which will give connected car owners further incentive to opt for UBI policies.

The increasing popularity of usage-based insurance can be an opportunity for both core insurance providers and OEMs to enter into the market of connected insurance. Additionally, the current UBI service providers can look for market opportunities within platforms, data analytics, and devices.

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