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The usage insurance, also referred to as pay-as-you-drive, pay-per-mile, or pay-as-you-go, is a kind of auto insurance that measures where a vehicle is driven, how far it’s driven, and how it’s driven depending on the insurer’s program. It leverages in-vehicle communication systems to track driving behavior as well as mileage. The usage insurance often make use of the telematics technology to get accurate feedback of driver safety practices and driving patterns, allowing the insurance companies to change the cost of insurance based on the estimated risk. The factors such as total miles driven, on-road vehicle location (Global Positioning System), the time of day, airbag usage, and patterns of acceleration & braking enables the insurance providers to line up insurance premium rates according to the actual driving as well as to reduce fake insurance claims.

The market for usage insurance is expected to reach rise at a CAGR of 10.3 percent during the forecast period. The rising demand for usage-based insurance provides flexible and lower insurance premiums compared to regular insurance and the accurate & timely data collection fuels growth of the usage insurance market.

MARKET DRIVERS:

Rising number of insurance enterprises are actively inclining towards usage-based insurance systems to improve business profitability. This factor significantly push the market growth. For instance, the usage insurance policies leverages machine-to-machine technologies to capture data from in-vehicle devices, allowing the insurer to adjust and set premiums based on driving behavior, instead of the claim history of an individual. The use of machine-to-machine technologies enables insurers to improve pricing models, control over claim costs, and accelerate revenue growth. In addition to this, factors such as government regulations on telematics and surge in number of growing on-road vehicles propel growth of the market. Moreover, the market players' adoption of strategies such as product launches to strengthen their portfolio and regional presence accelerates the growth of the market. For instance, in January 2017, Cambridge Mobile Telematics, the provider of products and solution to make roads and drivers safer, launched DriveWell Tag, an IoT device for usage-based insurance applications with integrated remote diagnostics and roadside assistance.

However, the complex process of application of overall usage-based insurance and the factors such as various data security issues and high installation cost of telematics may hamper the growth of the market to some extent during forecast period. On the other hand, rising trend of advance smartphone-based usage-based insurance and growth in the number of connected cars create lucrative growth opportunities for the market.

Throughout the forecast period, pay-as-you-drive (PAYD) will continue to hold a dominant share of the global market, on the basis of policy. This is due to rising adoption of PAYD models to gain the benefits of mileage-based insurance premiums. In this type of model, the value of premium is determined by the miles driven by a car. However, the pay-how-you drive (PHYD) segment is anticipated to witness highest growth rate during the forecast period. This is attributed to the emerging trend among the market players to introduce PHYD model to enhance the car insurance product offerings as well as to better serve people’s driving behaviours and lifestyles. For instance, in June 2020, Toyota and Aioi launched Toyota Care PHYD - Pay How You Drive, the innovative insurance scheme to create good driver society and offer more savings.

According to the technology type, the embedded telematics segment is expected to hold a dominant global market share. Growth of this segment is manly driven by upsurge in a popularity of connected cars and the rising driver data volumes being produced from these cars. The embedded telematics system is precisely captures vehicle data as it is an integrated part of the vehicle. Consequently, the segment is also projected to grow at highest growth rate, which propels the usage insurance market in the upcoming years.

USAGE INSURANCE MARKET SEGMENTATION:

By Policy Type

  • Pay-how-you-drive (PHYD)
  • Pay-as-you-drive (PAYD)
  • Manage-how-you-drive (MHYD)

By Technology:

  • OBD-II
  • Smartphone
  • Black Box
  • Embedded Telematics

By Vehicle:

  • Passenger Vehicle
  • Commercial Vehicle

By Region:

  • North America
  • Latin America
  • Europe
  • Asia Pacific
  • Middle East & Africa

REGIONAL INSIGHT:

North America dominated the global usage insurance market in 2019 and is likely to be the most profitable region throughout forecast period. This is due to upsurge adoption of Mobility as a service and growing number of collaborations among insurance and telematics enterprises in the region. For instance, in September 2020, Metromile, the US-based full-stack insurtech company, collaborated with Ford, an American multinational automaker to offer customers with hyperpersonalized usage-based insurance (UBI) coverage. In addition to this, the region is home to several key market players such as State Farm Automobile Mutual Insurance Company, Progressive Casualty Insurance Company, Allstate Insurance Company, and Liberty Mutual Insurance Company. This factor further contributes to the growth in North America market size.

Further, Europe region is expected to witness highest growth rate during the forecast period. This is due to the greater focus towards driver and road safety. In addition, the region has experienced huge uptake of connected vehicles. This is anticipated to be opportunistic for the market growth in the region.

FEW KEY PLAYERS IN USAGE INSURANCE MARKET:

  • Insure the Box
  • AllState Insurance Company
  • State Farm
  • Uniposai
  • Uniqa
  • Groupama
  • Generalli
  • Liberty Mutual
  • Allianz SE

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