Data from a recently published report suggests that the usage-based auto insurance (UBI) market is anticipated to reach a market size of US$123 billion (about C$166 billion) by 2022.
The report, prepared by the researchers and analysts at Allied Market Research (AMR), noted that this growth will be driven by “flexible insurance premiums, lower accident & vehicle theft possibilities, accurate & timely data collection, and lower fuel consumption”, among other factors that would improve the UBI process.
UBI is an insurance service in which premiums are determined based on the driving behavior of consumers. Typically, this involves the use of telematics and other similar communication technologies to monitor factors such as braking and cornering patterns. Data retrieved from these processes is then considered by the insurer when setting premiums for consumers.
Allied Market Research’s paper identified three types of services that are classified under UBI: pay-as-you-drive (PAYD), pay-how-you-drive (PHYD), and manage-how-you-drive (MHYD). The PAYD service type segment accounted for the largest market share in 2015 due to its cost efficiency. The same paper suggests that the MHYD type is expected to grow at the fastest rate from 2016 to 2022, since it provides a higher level of freedom and flexibility to consumers.
The UBI market is further subdivided based on the types of technology used to monitor driver behavior: BD-II, smartphone, hybrid, and black box. Of the technologies, the black box segment accounted for the majority share in 2015 due to its security and reliability. The study also pointed out that the black box’s accurate and timely data collection capabilities have helped with its popularity. Smartphone technology, the study hypothesized, would see the fastest growth in the global usage-based insurance market, thanks to its convenience.
North America is expected to experience the fastest growth rate for UBI insurance services in the world, the paper said, driven by the increased penetration of UBI in the US and Canada. Unsurprisingly, the popularity of UBI services has increased rapidly among youth and teenagers—one of the industry’s major growth factors.
"Consistent improvements in telematics based data collection and analysis techniques have led to the growth of Usage-based insurance market,” said AMR research analyst for Consumer Goods Sheetanshu Upadhayay. “Insurance companies are diversifying into the business segment in order to capitalize upon the upcoming business opportunity.”
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