Usage-based insurance to propel  with a CAGR of 27.6% by 2030

The market is projected to reach $64.29b

The region's usage-based insurance (UBI) market has experienced significant growth and transformation over recent years. Valued at $5.64b in 2020, the market is projected to reach $64.29b by 2030, growing at a compound annual growth rate (CAGR) of 27.6% from 2021 to 2030. 

Usage-based insurance (UBI) links insurance premiums directly to the amount of time a vehicle is used, aligning premiums with driving habits monitored via telematics devices installed in vehicles.

Key growth drivers 

Insurers are leveraging IoT-enabled telematics to collect detailed behavioural data, improving risk assessment and enabling personalised premium calculations. Devices monitor speed, distance travelled, and driving patterns, enhancing the precision of UBI programs.

Convenience and ease of data collection through smartphone apps are driving the rapid adoption of smartphone-based UBI programs. This segment is expected to grow at the highest rate during the forecast period.

Increased economic strength in developing nations such as China and India is creating opportunities for market expansion.

As urban areas expand and vehicle ownership rises, the demand for flexible and cost-effective insurance solutions like UBI grows.

Governments are increasingly promoting digitalisation and innovation in the insurance sector, fostering a favourable environment for UBI adoption.

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Challenges and opportunities

The initial cost of installing telematics devices remains a barrier to widespread adoption.

Protecting sensitive driver data from breaches is a critical issue that insurers must address.

The use of advanced technologies, such as AI and machine learning, can enhance data analytics and risk assessment capabilities.

Increasing awareness and concern for driver safety can drive the adoption of UBI, as these programs promote safer driving habits.

Impact of COVID-19

The COVID-19 pandemic has reshaped the insurance industry, with a notable decline in vehicle usage leading to fewer claims. 

However, in the long term, the pandemic is expected to boost the UBI market as consumers seek cost-effective insurance solutions tailored to reduced driving frequencies.

Industry experts highlight the significant role of UBI in fostering economic growth by providing tailored financial protection. 

As demand for UBI increases, companies are likely to form more strategic partnerships and expand their service offerings. The acquisitions, like Generali's purchase of AXA Affin shares, exemplify efforts to strengthen market positions and innovate within the insurance landscape.