Usage-Based Insurance Market to reach USD 288.4 billion in 2030, at a CAGR of 28.7% | IMR

The Usage Based Insurance Market was valued at USD 49.4 billion in 2023-e, and is projected to grow at a CAGR of 28.7% through 2030 to reach USD 288.4 billion. Usage-based insurance (UBI) is set to revolutionize the insurance industry with the introduction of lower premiums and safer driving behavior. Technological innovations in telematics and the increasing popularity of usage-based insurance products are driving the market growth.

Pay-How-You-Drive (PHYD) incentivizes drivers to drive safely. In recent years there has been an increase in consumer demand for greater connectivity and intelligence in their vehicles. The adoption of advanced telematics has enabled the adoption of PHYD as it allows analyzing a large number of metrics of drivers to assess the premium rates. The insurance industry greatly benefits from useful statistics about the driving behaviors of policy buyers. An increasing adoption of PHYD is seen to improve driver safety by monitoring driving behavior. Thus, the increasing adoption of telematics is driving the market growth.

UBI benefits greatly to car owners who don't drive their cars very often, as they can save money on their premiums. The pleasure category of car owners is often such drivers who drive their cars only occasionally. Adoption of UBI rose to some extent during the COVID-19 pandemic owing to the restrictions on traveling. This drove auto insurers to offer more customized policies including usage-based insurance to consumers.

Several passenger car owners opted for UBI policies to reduce their premium costs. In addition, several auto insurers also provide UBI policies for multiple cars in one policy only. Consumers who own multiple cars can benefit from such policies as well. Thus, the pleasure segment is anticipated to grow at a significant pace.

Several countries in the region including South Korea, Japan, India, Thailand, and Singapore have adopted favorable regulatory policies for inclusion of UBI insurance. For instance, in March 2021, MSIG launched usage-based car insurance plans across Thailand in partnership with insurtech firm AIS. The product was the first one launched through the government's regulatory sandbox.

In July 2022, the Insurance Regulatory and Development Authority of India (IRDAI) notified that Insurance companies could offer Usage Based Insurance (UBI) as add-ons to their policies. In October 2021, Carro (Singapore) launched its first AI-powered pay-per-km car insurance indicates that the favorable regulatory policies are driving the market in Asia-Pacific.  

The key companies in the usage-based insurance market are continuously striving to strengthen their portfolio to meet the growing demand. The companies are focused on establishing partnerships with government organizations and industries. Some of the key companies in the market are Allstate, AXA, GEICO, Liberty Mutual, Mapfre, Progressive, State Farm, Travelers, Unipolsai, and USAA.