Usage-based Insurance for Automotive Industry to Hit USD 270.3 Billion by 2032 | Persistence Market Research Forecast

The automotive insurance industry is undergoing a major transformation, driven by advancements in telematics and the increasing adoption of connected car technologies. Usage-based insurance (UBI), a model that allows insurance premiums to be adjusted based on individual driving behaviors and vehicle usage patterns, is at the forefront of this change. UBI is not only revolutionizing how insurance is priced but also enhancing safety, reducing fraud, and increasing customer satisfaction.

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Overview of the Automotive Usage-Based Insurance Market

The global automotive usage-based insurance market is witnessing robust growth, projected to reach a size of US$ 69.8 billion in 2025. By 2032, this market is anticipated to attain a value of US$ 270.3 billion, growing at a compound annual growth rate (CAGR) of 21.3% during the forecast period. The market is being fueled by the rising demand for personalized insurance pricing based on real-time driving data and the growing adoption of connected cars, which rely on telematics to collect data on driving habits, mileage, and vehicle usage.

Usage-based insurance offers a win-win scenario for both insurers and consumers. It allows insurers to more accurately assess risk and set premiums, while consumers benefit from lower rates that reflect their individual driving behavior. This model is being further propelled by government initiatives that support the integration of telematics devices into vehicles, helping improve road safety, theft recovery, fraud prevention, and customer satisfaction.

Key Growth Drivers Behind Market Expansion

A key factor driving the automotive UBI market is the increasing penetration of connected vehicles, which are equipped with telematics systems that collect and transmit driving data. Consumers' growing demand for more personalized and flexible insurance options is also a major driver, as many drivers prefer to pay based on how much and how safely they drive, rather than traditional methods that rely on age, gender, or historical data.

In addition, the rising use of smartphones and mobile apps has made it easier for drivers to participate in UBI programs. Smartphones enable drivers to track their driving behavior in real time and receive instant feedback on how they can save money on their premiums.

Leading Segment: Pay-How-You-Drive

The pay-how-you-drive segment is expected to dominate the automotive UBI market, accounting for 46.8% of the market share in 2025. This segment is particularly popular because it offers personalized pricing based on how safely and responsibly an individual drives, allowing consumers to directly influence their insurance premiums. The integration of smart insurance models that rely on telematics to measure driving behavior is driving the popularity of this segment.

Leading Geographical Region: North America

North America is set to lead the automotive UBI market, with an estimated 36.4% market share in 2025. This dominance is attributed to the widespread adoption of telematics technology in the region, coupled with strong partnerships between original equipment manufacturers (OEMs) and insurance companies. The region is also experiencing a surge in the number of connected vehicles on the road, with over 25 million telematically connected vehicles in the U.S. by 2023, setting the stage for the broader integration of UBI systems.

Key Highlights of the Automotive Usage-Based Insurance Market

• The pay-how-you-drive type segment is estimated to capture 46.8% of the market share in 2025 due to the growing popularity of personalized insurance models.
• Passenger vehicles are projected to account for 68.5% of the market share in 2025, driven by their high popularity among commuters and the increasing adoption of telematics technology.
• North America is expected to hold 36.4% of the global market share in 2025, driven by the high adoption of telematics technology and strategic partnerships between insurers and OEMs.
• Europe is anticipated to hold a 28.7% share in 2025, bolstered by strong regulations around vehicle safety and the increasing demand for UBI solutions.
• The global market growth rate for UBI from 2025 to 2032 is expected to be 21.3% CAGR, with significant growth coming from digital transformation and innovative pricing models.
• Government initiatives and technological advancements, such as those in the U.S. and Europe, are helping to further expand the market.

Market Segmentation

The automotive UBI market is primarily segmented by pricing model, vehicle type, and region.

By Pricing Model

The two primary pricing models for automotive usage-based insurance are pay-how-you-drive (PHYD) and pay-as-you-drive (PAYD). Under the pay-how-you-drive model, insurance premiums are based on individual driving behavior, including speed, braking patterns, and acceleration. This model is expected to see the largest market share due to the increasing demand for personalized pricing and the integration of smart telematics devices in vehicles. Pay-as-you-drive, on the other hand, charges premiums based on the number of miles driven, appealing to consumers who drive fewer miles and want to lower their insurance costs.

By Vehicle Type

The vehicle type segment includes passenger vehicles, commercial vehicles, and electric vehicles. Passenger vehicles are expected to dominate the market, accounting for 68.5% of the total market share in 2025, driven by their widespread use and the increasing demand for connected car technologies. The commercial vehicle segment, while smaller, is also expected to experience growth as fleet management systems increasingly adopt telematics for tracking driving habits, reducing risk, and improving operational efficiency.

Regional Insights

North America

North America is set to be the largest market for automotive UBI, driven by the high adoption of telematics technologies and a strong consumer preference for personalized insurance models. In the U.S., government-backed initiatives and the increasing number of connected vehicles are playing a crucial role in market expansion. By 2025, North America is expected to account for 36.4% of the market share, with a projected CAGR of 17.3% from 2025 to 2032.

Europe

Europe is another key region for the automotive UBI market, with 28.7% of the market share in 2025. The region benefits from robust regulatory frameworks that mandate telematics systems for certain vehicle types and an increasing focus on road safety. European consumers are also more inclined to embrace UBI models, driven by the region's high level of technological innovation and government support for connected car technologies.

Market Drivers

The primary drivers of the automotive UBI market include the increasing penetration of connected cars, the rise in smartphone usage, and the growing demand for personalized insurance pricing. As telematics technology becomes more widespread, insurers can offer premiums that are more accurately aligned with a driver's actual behavior, reducing the risk for insurers while rewarding safe drivers with lower premiums. Moreover, the growing focus on road safety and the push for digital transformation in the insurance industry are providing further opportunities for UBI adoption.

Market Restraints

Despite its promising growth, the automotive UBI market faces certain challenges. One key restraint is consumer privacy concerns regarding the collection of driving data. Many potential users may be reluctant to share data on their driving habits, fearing that it could be misused or sold. Additionally, the upfront cost of installing telematics devices can be a barrier, particularly in developing markets where affordability is a significant concern.

Market Opportunities

There are several growth opportunities for the automotive UBI market. The increasing adoption of electric vehicles (EVs) presents an opportunity for insurers to develop customized UBI models specifically tailored to the needs of EV owners. Additionally, as more countries implement smart city initiatives and connected infrastructure, the potential for real-time data collection and enhanced safety features in vehicles increases, further driving the demand for UBI solutions.

Reasons to Buy the Report

✔ Gain comprehensive insights into the automotive UBI market's growth prospects and market dynamics.
✔ Understand the key factors driving market expansion and learn about potential barriers to growth.
✔ Explore detailed market segmentation by vehicle type, pricing model, and region.
✔ Access up-to-date data on the competitive landscape and key industry players.
✔ Evaluate market forecasts and investment opportunities for the period 2025-2032.

Company Insights

Key Players in the Automotive Usage-Based Insurance Market

• Progressive Insurance
• Allstate
• State Farm Insurance
• MetLife
• AXA XL
• Mapfre

Recent Developments

1. In October 2023, Progressive Insurance partnered with General Motors to integrate OnStar telematics into its Snapshot program, providing real-time feedback to drivers and offering potential savings based on their driving behavior.

2. Allstate introduced Drivewise+ in November 2023, combining cutting-edge telematics with accident prevention safety features to help drivers avoid accidents and reduce premiums.

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