Usage-based Insurance For Automotive Market Size, Share & Trends Analysis Report By Type (PAYD, PHYD, MHYD), By Technology (OBD II, Black Box, Smartphones), By Vehicle, By Region, And Segment Forecasts, 2020 - 2027

Report Overview

The global usage-based insurance for automotive market size was valued at USD 28.0 billion in 2019 and is expected to grow at a compound annual growth rate (CAGR) of 21.3% from 2020 to 2027. Increasing penetration of usage-based insurance owing to benefits offered, such as lower insurance premium than the standard one and the high adoption of connected car services, are majorly contributing to the market growth. Thus, there has been a rising inclination of consumers in the automotive industry toward usage-based insurance. Furthermore, increased sales of pre-equipped telematics vehicles, government regulations for vehicle safety are some of the factors that are further anticipated to drive the demand in the market. The changing business dynamics of the automotive insurance industry has led to the adoption of telematics-based insurance services.

A telematics device is plugged into the onboard diagnostics (OBD) port of a vehicle, initially installed by the vehicle manufacturer that collects particular data and sends it via wireless communication to the carrier. Moreover, telematics allows the insurance companies to monitor vehicle driver behavior, track mileage, and communicate with the insurer on a real-time basis. Thus, the early adopters of the telematics-based insurance services are leveraging from this technology.

Additionally, usage-based insurance allows consumers to pay a premium based on their driving pattern and miles driven. These companies benefit from usage-based insurance features, which include fraud detection, pricing accuracy, stolen vehicle recovery, automated claims management, reduction, or elimination of towing charges. The information collected is used to provide value-added services to customers while reducing claims leakage and lowering operating expenses. Thus, usage-based insurance for automotive efficiently serves both the customers and insurance providers, which is expected to drive the market growth.

Insurance companies offer discounts on premiums based on real-time monitoring of vehicle drivers. However, challenges such as data privacy and theft and low transparency in data acquisition techniques are anticipated to hinder the market growth. Also, poor internet connectivity may affect the real-time monitoring systems' outcome, thereby affecting the discounts on premiums offered by insurance companies. Furthermore, challenges such as lack of personal integrity and design complexity may adversely affect market growth.

Type Insights

In terms of revenue, the Pay-How-You-Drive (PHYD) segment dominated the market with a share of 60.29% in 2019. Pay-How-You-Drive (PHYD) is a form of an insurance premium incurred based on the driving pattern of the vehicle driver. This type of insurance monitors metrics such as how hard you brake, how quickly you accelerate, and the sharpness of turns. Moreover, customers are leveraging this type of insurance policy to reduce reckless driving and adopt safe driving practices to earn incentives and rewards on the insurance premium.

Meanwhile, the Manage-How-You-Drive (MHYD) segment is projected to witness considerable growth over the forecast period, at a CAGR of over 24.1%. This growth is attributed to instantaneous driver feedback about his driving pattern, thus offering real-time insurance premiums. Moreover, integration of other connected services, such as theft insurance programs and vehicle wellness reports, with MHYD packages, will further bolster market growth. The Pay-As-You-Drive (PAYD) segment is expected to witness significant growth due to the benefits of mileage-based insurance premiums.

Technology Insights

In terms of revenue, the OBD-II segment dominated the usage-based insurance for automotive market with a revenue share of 50.16% in 2019. The onboard dongles are plugged into a vehicle for capturing real-time data around specific events. They can assess everything from speeding and collisions, acceleration, and braking of the vehicle. Also, as the insurers provide these dongles, there has been rising adoption of these types of OBD-II based dongles.

Meanwhile, the smartphone segment is projected to witness substantial growth over the forecast period, expanding at a CAGR of over 27.0%. Since no external telematics device is required for vehicle monitoring, the usage of this technology has witnessed significant growth. The smartphone enables insurance providers to monitor and track the driving pattern of the driver. The insurers and customers are befitted as they do not need to invest in the telematics device required for usage-based insurance for automotive. Moreover, insurance companies are partnering with software Technology providers to offer smartphone-based telematics insurance.

Vehicle Type Insights

In terms of revenue, the passenger vehicle type segment dominated the market with a share of 88.04% in 2019. This growth is attributed to rising sales of passenger vehicles having a pre-installed telematics device in it. The telematics device enables real-time information about the vehicle’s health and distance traveled and driving habits. Moreover, passenger vehicle drivers can leverage the capabilities of telematics solutions for improving driving habits, thereby leading to reduced insurance premiums and discounts on insurance for safe driving.

Meanwhile, the commercial vehicle segment is projected to witness a considerable CAGR of over 18.1% during the forecast period. The segment is anticipated to gain momentum shortly due to the significant presence of commercial fleets. The commercial fleet owners are leveraging the benefits of usage-based insurance due to lower costs of insurance premiums.

Regional Insights

North America dominated the market, with a revenue share of 34.94% in 2019. This dominance can be attributed to the presence of key players operating in the region, including Progressive Corporation, Allstate Corporation, and State Farm Automobile Mutual Insurance Company. Moreover, technological advancements and a massive demand for interconnected services further drive the regional market growth. Additionally, increasing penetration of mobility as a service coupled with partnerships between telematics and insurance companies are generating avenues for market growth.

Asia Pacific is expected to witness a substantial CAGR of over 25.2% from 2020 to 2027. Countries such as China and Japan are anticipated to create opportunities for market growth in the region. Additionally, the Asia Pacific region is in nascent stages owing to challenges such as lack of data protection and consumer awareness. However, the proliferation of smartphone technology and mobile connectivity is further anticipated to bolster usage-based insurance for the automotive market. 

Key Companies & Market Share Insights

The market is consolidated owing to the presence of well-established companies operating globally. The major global players operating in the market include Progressive Corporation, Allstate Corporation, State Farm Automobile Mutual Insurance Company, Liberty Mutual Insurance Company, Allianz SE, and AXA S.A. Companies are mainly focusing on mergers, acquisitions, and joint ventures or collaborations to hold a competitive position in the market. Moreover, the players operating in the market are focusing on enhancing their market presence by adopting various growth strategies. These strategies help organizations to expand their business geographically and strengthen their offerings in particular regions. Moreover, companies focus more on providing an improved user experience as part of their growth strategy. Some of the prominent players in the usage-based insurance for automotive market include:

• Progressive Corporation

• Generali Group

• Mapfre S.A.

• American International Group, Inc.

Usage-based Insurance For Automotive Market Report Scope

Segments Covered in the Report

This report forecasts revenue growth at the global, regional, and country levels and provides an analysis of the latest industry trends in each of the sub-segments from 2016 to 2027. For the purpose of this study, Grand View Research has segmented the global usage-based insurance for automotive market report based on type, technology, vehicle type, and region:

• Type Outlook (Revenue, USD Billion, 2016 - 2027)

  • Pay-As-You-Drive (PAYD)

  • Pay-How-You-Drive (PHYD)

  • Manage-How-You-Drive (MHYD)

• Technology Outlook (Revenue, USD Billion, 2016 - 2027)

  • OBD II

  • Black Box

  • Smartphones

  • Others

• Vehicle Type Outlook (Revenue, USD Billion, 2016 - 2027)

  • Passenger Auto

  • Commercial Auto

• Regional Outlook (Revenue, USD Billion, 2016 - 2027)

  • North America

    • The U.S.

    • Canada

  • Europe

    • The U.K.

    • Germany

    • France

  • Asia Pacific

    • China

    • India

    • Japan

  • Latin America

    • Brazil

    • Mexico

  • The Middle East & Africa