The number of consumer subscribers to usage-based auto insurance (UBI) is expected to grow to 142 million globally by 2023 from close to 12 million in 2015, according to a new report from IHS Automotive, which offers insight on the automotive industry.
“The current UBI landscape is in transition with robust expansion,” said Ms Stacey Oh, Manager, Automotive Technology at IHS Automotive. “New insurers are entering the market, new markets are being opened and new solutions are being launched.” UBI uses real-time information about a driver’s actual driving ability and habits to assess actuarial risk, capturing information from the in-vehicle telematics system.
However, providers are still identifying and developing the strongest business models, the best value proposition and the most suitable data capture device as those providers seek to alleviate divergence with the auto industry. The added challenge of constantly evolving technology— including telematics, the connected car and mobility itsel—are influencing factors.
Markets to watch
Today, Italy is the only country in which UBI has a double-digit share of the insurance market, representing 10% of the market there in 2015, according to the report. Government intervention was a strong influencer there. In 2012, in response to fraudulent insurance claims, Italy’s Prime Minister instituted a decree stipulating that if an insurance company already offered a UBI product with a “black box,” it must offer the box to the customer at no charge and offer a significant upfront premium discount for consumers.
Italy and the UK are by far the most mature UBI markets in Europe. Activity is growing in France, Germany and Spain, though the solution remains very niche-like in these markets. Insurers are unsure of what business propositions work best and consumers are still unfamiliar with the product. Privacy concerns, especially in Germany, make consumers wary of sharing data.
Due to its market potential, the US will lead the way in UBI marketing and innovation in the coming year, the report said. America is the largest car insurance market in the world, with more than 260 million vehicles in operation in 2015. According to IHS estimates, there were more than 5 million UBI policyholders in 2015 in the US, by far the most of any other country. Italy was a distant second, with just 3.6 million subscribers out of 36.8 million vehicles in operation in 2015.
Another key market to watch is China. The Chinese government began granting foreign insurance carriers access to the market in 2012, and approximately 15 insurers will launch UBI pilot programmes this year. The sheer size of the automotive market allows for the UBI subscriber volumes to grow from 50,000 in 2015 to over 22 million by 2023, according to IHS forecasts.
The UBI report is based on more than 40 interviews from across the value chain, from insurance carriers, data aggregators, telecommunications companies, to automotive OEMs.