Industry: Automotive
Published Date: January-2025
Format: PPT*, PDF, EXCEL
Delivery Timelines: Contact Sales
Number of Pages: 195
Report ID: PMRREP35063
The usage-based insurance for automotive market is estimated to increase from US$ 69.8 Bn in 2025 to US$ 270.3 Bn by 2032. The market is projected to record a CAGR of 21.3% during the forecast period from 2025 to 2032.
Key Highlights of the Market
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Market Attributes |
Key Insights |
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Usage-based Insurance for Automotive Market Size (2025E) |
US$ 69.8 Bn |
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Projected Market Value (2032F) |
US$ 270.3 Bn |
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Global Market Growth Rate (CAGR 2025 to 2032) |
21.3% |
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Historical Market Growth Rate (CAGR 2019 to 2023) |
14.6% |
North America has consistently maintained a substantial share in the usage-based insurance for automotive market, accounting for 36.4% in 2025. North America was among the first region to embrace telematics technology and its application in insurance.
The U.S. and Canada have well-developed telematics systems, which are integral to UBI programs. These systems allow insurers to monitor driving behavior, such as speed, acceleration, braking, and distance, in real-time. The widespread adoption of connected car technology and GPS systems facilitates the collection of this data.
North America has been a hub for innovation on the Internet of Things (IoT) and Big Data. The ability to integrate IoT devices into vehicles to collect and analyze data has been a significant driver for the market making it easy for insurers to assess driving behaviors accurately.
Based on type, the pay-how-you-drive (PHYD) has maintained its position as the largest contributor, and to capture a substantial 46.8% share in 2025. Telematics technology, which enables insurers to track driving behavior in real-time, has become more widely available and cost-effective. Automakers are integrating telematics systems in vehicles, making PHYD policies easy to implement.
Governments in various regions are pushing for smart, and efficient insurance models. In many cases, PHYD aligns with government safety goals by promoting safe driving behaviors. Additionally, UBI adoption is growing in markets like Europe and North America, where there is a regulatory push for cleaner, safer, and more efficient driving.
The smartphone-based UBI segment is anticipated to expand at a CAGR of 24.5% through 2032. The increasing penetration of smartphones globally means that more consumers have access to apps and services that support UBI. This accessibility enables insurers to reach a broad audience.
Smartphone-based UBI easily integrates with other mobility and telematics services, such as ride-sharing and fleet management, providing a more comprehensive solution for both personal and commercial insurance. Smartphones are equipped with various sensors and GPS technology, allowing insurers to collect accurate driving data (e.g., speed, braking patterns, acceleration, and location). This data is used to assess risk more accurately, leading to tailored insurance premiums based on individual driving behavior.
The passenger vehicles segment is estimated to account for a 68.5% market share in 2025 a substantial lead, commanding an impressive 68.5% market share in terms of value. Many consumers are interested in insurance products that offer personalized rates based on their driving behavior. UBI programs provide this personalization, allowing drivers to potentially lower their insurance premiums through safe driving.
The growth of urban areas and ride-sharing services has led to a surge in passenger vehicle usage, further driving the demand for UBI products as consumers seek flexible insurance options. Insurance companies have targeted passenger vehicle owners aggressively with UBI offerings, recognizing the significant potential in this segment for acquiring new customers and retaining existing ones.
Usage-based Insurance (UBI) is a type of auto insurance policy where the premiums are determined by the actual usage of the vehicle. This insurance model uses telematics technology to track various aspects of a driver's behavior, including distance driven, driving time, speed, braking patterns, and overall driving habits.
The collected data is then used to calculate a more personalized premium, which has the potential to reward safe driving practices and lower costs for infrequent or cautious drivers. UBI aims to offer fairer pricing by aligning insurance costs more closely with individual driving behaviors and risks.
As technology advances and concerns about privacy and data security are addressed, the adoption of UBI is expected to increase, offering a more dynamic and responsive approach to vehicle insurance. First Notification of Risk (FNOR) solutions have seen a dramatic increase over the past 24 months and are poised to make a significant impact on roads, as traditional insurance systems struggle to match the speed and accuracy of telematics.
FNOR allows for risk assessment before an accident occurs, and even helps prevent accidents from happening in the first place. This represents a significant advancement over FNOL (First Notification of Loss).
One of the primary causes of delayed payments for insurers is the complexity of identifying and contacting all parties involved in a crash. Before the advent of digital solutions, this process was a logistical challenge, often resulting in vehicle owners waiting weeks for compensation. However, UBI policies now offer products that address these issues swiftly and efficiently by utilizing data to assess the crash site situation.
Crash detection features, which are commonly included, automatically contact emergency services and record the incident in its entirety, both before and after the crash. Additionally, by leveraging AI and ML, these systems can complete all necessary online forms, significantly expediting the claims process.
The global usage-based insurance (UBI) for automotive market experienced a substantial rise in adoption rates, with insurance companies leveraging real-time data to offer accurate and fair pricing models. A key factor contributing to the growth of UBI was the increasing availability of telematics devices and smartphone applications that could easily track driving behavior.
Leading insurance companies like Progressive, Allstate, and State Farm expanded their UBI offerings, providing customers with the option to install telematics devices in their vehicles or use mobile apps to monitor their driving. Progressive's Snapshot program, for instance, reported that by 2020, more than 25% of its new auto insurance customers had enrolled in the UBI program, reflecting a growing consumer interest in usage-based policies.
Governments and regulatory bodies in regions like North America and Europe began to recognize the potential benefits of UBI in promoting road safety and reducing accident rates. This regulatory support, combined with rising awareness about the cost-saving benefits of UBI, encouraged more drivers to opt for these policies. For example, the UK is the second largest UBI market in Europe with 1.3 million active policies till December 2021, demonstrating a clear upward trend.
Rise of Shared Mobility Services and Ridesharing
Traditionally, auto insurance policies have been structured around the concept of ownership, but the shift toward shared mobility and new vehicle technologies necessitates a more dynamic approach, leading to an increased demand for usage-based insurance (UBI) for automotive. UBI allows insurance premiums to be determined by actual usage patterns rather than fixed annual rates, making it a more tailored solution for consumers who engage with vehicles differently than traditional car owners.
Ride-sharing platforms like Uber and Lyft have popularized the idea of shared mobility, where consumers pay for transportation on an as-needed basis instead of owning vehicles. This shift has implications for insurance, as drivers are now operating in a different capacity than personal vehicle users. As the number of ride-share drivers increases, insurers are being called upon to provide coverage that reflects the varied usage patterns of these drivers.
Extensive Use of Telematics Devices
With the proliferation of smartphones and in-car connectivity, many drivers now have access to applications and devices that can monitor their driving habits in real time. This rapid growth not only highlights the technology's potential but also indicates a shift in consumer attitudes towards insurance products that incorporate real-time data. For instance,
Progressive Insurance's Snapshot program offers discounts to drivers who allow the company to monitor their driving behavior through a telematics device. Reports indicate that users of the Snapshot program saved an average of $231 per year, encouraging more customers to opt for UBI policies. Allstate's Drive wise program rewards safe driving with cash back and discounts, further demonstrating the effectiveness of telematics in promoting safe driving behaviors while driving demand for UBI.
Integration with Legacy Systems
Legacy systems, often built on outdated technology stacks, lack the flexibility and interoperability needed to seamlessly integrate with modern telematics and data analytics platforms essential for UBI. This integration difficulty arises because legacy systems were designed with a traditional, static insurance model in mind, which does not accommodate the dynamic data processing and real-time analytics required by UBI.
The technical incompatibility between legacy systems and UBI platforms often necessitates significant investment in IT infrastructure and development. Insurance companies must either retrofit their existing systems with new capabilities or undertake complete system overhauls. This process is both time-consuming and costly.
Legacy systems often have siloed data structures that do not easily communicate with new, integrated platforms. This results in data inconsistencies, errors, and security vulnerabilities. For instance, when Progressive Insurance first introduced its UBI program, Snapshot, the company faced significant challenges in ensuring that data from telematics devices was accurately and securely integrated into its existing systems. Such issues lead to delays in policy processing and claims management, ultimately affecting customer satisfaction and trust.
Emergence of Connected Vehicles
Connected vehicles are equipped with advanced technology that allows them to communicate with other vehicles, infrastructure, and cloud-based systems. This connectivity enables the collection of real-time data on driving behaviors, vehicle performance, and environmental conditions, which are essential for developing personalized insurance solutions.
According to a study by the National Highway Traffic Safety Administration (NHTSA), risky driving behaviors such as sudden acceleration and hard braking significantly increase the likelihood of accidents.
Connected vehicles contribute to the overall safety of the road environment, which benefits insurers and policyholders alike. By providing data that is used to enhance traffic management systems and inform infrastructure improvements, connected vehicles help to reduce the frequency and severity of accidents.
According to the Insurance Institute for Highway Safety (IIHS), advanced driver-assistance systems (ADAS), which are integral to connected vehicles, have the potential to prevent all crashes. This reduction in accidents translates to lower claims costs for insurers, fostering a more sustainable and profitable insurance ecosystem.
Partnership Opportunities with Technology Firms
The automotive insurance sector is undergoing a transformative shift due to partnerships with technology firms. As vehicles become increasingly connected and equipped with advanced telematics, insurance companies can leverage these technologies to offer usage-based insurance (UBI) products that better reflect individual driver behavior. This model not only enhances customer engagement but also allows for more personalized pricing and risk assessment.
Partnerships with technology firms enable insurers to access the necessary data and analytics to drive this change, ultimately leading to improved customer satisfaction and profitability. The integration of artificial intelligence (AI) and big data analytics through partnerships with tech firms has further revolutionized the automotive insurance landscape.
Insurers can analyze vast amounts of data from connected vehicles to identify risk patterns and predict potential claims more accurately. In addition to traditional insurers, new entrants like Insurtech startups are also capitalizing on technology partnerships to disrupt the market. Companies such as Metromile which offers pay-per-mile insurance, exemplify how innovative business models can emerge from collaboration with technology firms.
Vendors differentiate themselves through advanced technology integration and innovation. This includes offering state-of-the-art telematics devices, mobile apps, and data analytics platforms.
Forming strategic partnerships and developing ecosystems is another way vendors differentiate themselves. Collaborations with automotive manufacturers, technology providers, and data analytics firms enhance the value proposition of UBI offerings. Companies invest in user-friendly interfaces, proactive customer service, and educational resources to ensure a seamless experience.
Recent Developments in the Usage-based Insurance for Automotive Market
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Attributes |
Details |
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Forecast Period |
2025 to 2032 |
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Historical Data Available for |
2019 to 2023 |
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Market Analysis |
US$ Billion for Value |
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Key Regions Covered |
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Key Market Segments Covered |
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Key Companies Profiled |
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Report Coverage |
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Customization & Pricing |
Available upon request |
By Type
By Technology
By Vehicle Usage
By Vehicle Type
By Region
To know more about delivery timeline for this report Contact Sales
The market is estimated to increase from US$69.8 Bn in 2025 to US$270.3 Bn by 2032.
Rise of shared mobility services and ridesharing is a key driver for market growth.
Some of the leading players in the market are Progressive Corporation, State Farm Mutual and Automobile Insurance Company.
The market is projected to record a remarkable CAGR of 21.3% through 2032.
A key opportunity lies in leveraging advanced data analytics, artificial intelligence (AI) and integration with smart city initiatives.
