Automotive Usage-based Insurance Market Size, Share, and Growth Forecast for 2025 - 2032

The global automotive usage-based insurance market is estimated to reach a size of US$ 69.8 Bn in 2025. It is predicted to rise at a CAGR of 21.3% through the assessment period to attain a value of US$ 270.3 Bn by 2032.

Usage-based Insurance (UBI) is transforming the insurance market by utilizing telematics data to determine rates according to driving habits, miles, and vehicle usage trends. Increased sales of connected cars and government backing for telematic devices, which provide advantages including better driving abilities, theft recovery, fraud prevention, and customer happiness, are projected to propel the market.

In October 2023, Progressive Insurance extended its Snapshot UBI program to offer real-time premium adjustments based on driver behavior. In November 2023, Allstate introduced Drivewise+, which combines cutting-edge telematics with safety warnings to avoid accidents.

Key Highlights of the Market

• The usage-based insurance market is rising due to increasing use of telematics and connected car technologies.
• Consumers are increasingly seeking personalized insurance pricing based on their driving habits, boosting the demand for UBIs.
• Rise in smartphone usage has made it easier to implement usage-based insurance tracking.

• The automotive insurance industry is experiencing substantial growth, driven by digital transformation and innovative pricing strategies.
• In 2025, pay-how-you-drive type segment is estimated to attain a market share of 46.8% due to integration of smart insurance models.
• Based on vehicle type, passenger vehicles are projected to account for a market share of 68.5% in 2025 due to their high popularity among commuters.
• North America is estimated to attain a market share of 36.4% in 2025, owing to the utilization of telematics technology.  
• Europe is anticipated to hold a market share of 28.7% in 2025 with robust regulations for vehicle safety.

North America is set to hold a share of 36.4% of the global market in 2025, due to the widespread use of telematics technology and collaborations among OEMs and insurers. The region is estimated to record a CAGR of 17.3% from 2025 to 2032.

The adoption of UBI has been strengthened by the U.S.'s rising emphasis on MaaS and linked car ecosystems. In 2023, over 25 million vehicles were telematically connected, setting the stage for broad integration.

• In October 2023, Progressive Insurance partnered with General Motors to integrate OnStar telematics into its Snapshot program, offering drivers real-time feedback and cost savings.
• In November 2023, Allstate added enhanced analytics for accident prevention to their Drivewise platform.

Europe is poised to account for 28.7% of the global market share in 2025, driven by the adoption of vehicle telematics systems, including mandatory technologies like eCall in the European Union and ERA-GLONASS in Russia.

The use of embedded telematics systems in vehicles, which enabled real-time data collection for UBI programs, is a significant factor in Europe's UBI growth, with around 75% of new vehicles sold in 2023 featuring such systems. For example,

• In October 2023, AXA Insurance announced its partnership with BMW to integrate telematics-based insurance for electric and connected vehicles.
• In November 2023, Generali introduced its MyDrive UBI platform in Germany, providing competitive premiums based on analytics of driving behavior.

Europe's market growth is set to continue at a CAGR of 6.5% from 2025 to 2032, driven by its focus on safety, sustainability, and personalized insurance solutions. 

In the vehicle usage-based insurance industry, pay-how-you-drive (PHYD) continues to be the biggest contributor, with a 46.8% market share in 2025. Insurers can now track driving behavior in real-time due to telematics technology, which is becoming more affordable and widely available.

PHYD regulations are becoming simpler to enforce as automakers incorporate telematics technology into their cars. As it uses real-time driving data and offers incentives for safe driving, the category is anticipated to take the lion's share of the market. Smart insurance models that support safety objectives are being pushed by governments, and UBI acceptance is increasing in markets like North America and Europe.

The passenger vehicles segment is set to dominate the automotive usage-based insurance market in 2025, holding a 68.5% share. It is set to be driven by consumer demand for lower premiums, personalized discounts, and value-added services like remote vehicle control and theft protection.

The need for UBI schemes has increased due to the move toward rentals and leasing. In 2023, passenger car leasing in North America and Europe is likely to surge by 10%. For instance,

• In October 2023, Allstate extended its Drivewise UBI platform for passenger vehicles, integrating theft recovery services and real-time driving analytics.
• In November 2023, Zurich Insurance Group introduced its telematics-enabled UBI product in Asia, focusing on the expanding leasing and rental industry.

Increasing penetration of connected vehicles and the integration of telematics systems enhance UBI adoption among passenger vehicle owners globally.

Telematics and linked automobile technologies are driving growth in the automotive usage-based insurance industry by improving risk assessment and individualized pricing, encouraging digital transformation, and lowering costs. For instance,

• In January 2024, Roadzen Inc. launched unique telematics platforms integrating AI-powered driving behavior analysis, leading to a 55% increase in usage-based insurance enrollment.
• Consumer preferences for personalized insurance pricing have increased, with 65% of millennials and Gen Z consumers preferring more sophisticated mobile app-based tracking systems.
• State insurance regulators approved novel usage-based insurance models in 12 additional states, leading to a 35% increase in insurance product innovations focusing on driving behavior tracking.

Industry players see prospects in aspects such as electric vehicle integration, smartphone technology, and commercial fleet management. Electric vehicle insurance offers up to 50% discounts for efficient driving behaviors, while smartphone-based tracking technologies reduce implementation costs and increase accessibility.

The global automotive usage-based insurance market recorded a CAGR of 14.6% in the historical period from 2019 to 2024. Adoption of UBI in the automobile industry has increased due to the availability of smartphone applications and telematics devices, as well as the utilization of real-time data.

Insurance providers like Progressive, Allstate, and State Farm have increased the scope of their UBI programs by allowing clients to utilize mobile applications to track driving or install telematics devices in their cars. For example,

• According to studies, more than a quarter of newly purchased vehicle insurance has signed up for the UBI scheme by 2020.

More drivers are choosing these policies because of governments and regulatory agencies in North America and Europe realizing the potential advantages of UBI in enhancing traffic safety and lowering accident rates. For instance,

• The U.K. has 1.3 million active UBI plans as of December 2021, making it the second-largest UBI market in Europe.

Demand for vehicle usage-based insurances is estimated to record a considerable CAGR of 21.3% during the forecast period between 2025 and 2032.

Integration of Telematics Technology in Automotive Industry

Telematics is gaining popularity in the automotive industry, enhancing driving behavior and road safety, as well as aligning insurance premiums. Governments are imposing telematics regulations, such as in the European Union (EU) and Russia, and there is a high need for connected and intelligent automobiles. For instance,

• LexisNexis Risk Solutions reports that between 80% and 90% of auto insurance buyers in 2017 had telematics-enabled coverage.
• Increased regulatory and technological penetration is driving the vehicle telematics market's 23 to 24% year-on-year rise, which will affect the usage-based insurance market as linked car services become more widely accepted.

The Drive Wise program from Allstate and the Snapshot program from Progressive Insurance use telematics devices to track drivers' behavior to promote safe driving. This helps to increase the adoption of UBI insurance and shows how successful telematics is at encouraging safe driving.

Increasing Concerns Regarding Safety to Support Integration

Demand for usage-based insurance for cars is anticipated to rise because of its ability to boost brand loyalty, enhance customer relationship management, and attract new clients. This kind of insurance enables insurers to maintain transparency and cost management by providing frequent reports, guidance, and customized monthly bills.

UBI programs provide a flexible, personalized insurance plan based on the driving habits and demands of drivers, which influences market growth in different countries. Furthermore, usage-based insurance ensures insurers have margins and target the proper clients by improving risk assessment, pricing policies, and optimizing exposure.

Customers who haven't purchased insurance can have their risk profiles refined using aggregate driving data. All things considered, usage-based vehicle insurance has advantages including better customer retention, higher profitability, and easier claims procedures.

Increasing Risks of Data Breaches May Hinder the Market

Consumers have serious worries about data security and privacy, and growth of the automobile industry has been impacted by several worldwide data breaches. Lower security barriers are making consumers less inclined to select such alternatives due to the surging frequency of car data assaults and security breaches. For example,

• In January 2023, a third-party data breach exposed personal information for nearly two million Aflac life insurance and Zurich auto insurance policyholders, potentially impacting market growth.

Each U.S. state has its own usage-based insurance rules and regulations, complicating cross-state fleet operations. Inconsistent requirements force insurance businesses to offer novel products and services that comply with local laws, resulting in increased product variety. The legal framework for usage-based vehicle insurance favors lower premiums for safe driving practices, limiting the market's growth due to regulatory and legislative ambiguity.

Smartphone Integration in Automotive Industry to Create Opportunities   

Innovative smartphone-based tracking systems have been implemented by insurance firms, improving accessibility and lowering installation costs by 60%. For example,

• In 2025, smartphone-based UBI is anticipated to attain a market share of 30% owing to constant innovations in technology, based on a few studies.

Insurers can now reach a larger audience because of the high adoption of smartphones worldwide. UBI on smartphones offers a complete personal and business insurance solution by integrating with other telematics and mobility services. Smartphones equipped with sensors and GPS technology allow insurers to collect accurate driving data, assessing risk more accurately and resulting in tailored insurance premiums based on individual driving behavior.

Regulatory Support for Technology-driven Insurance Models Presents Prospects

The legislative support for technology-driven insurance models, which encourage telematics and data-driven solutions to enhance transparency, safety, and fraud reduction, is driving the global vehicle usage-based insurance industry. For example,

• In the European Union, mandates like eCall, which became mandatory for new cars in 2018, provide a strong foundation for telematics integration in insurance.
• In the U.S., state-level initiatives are easing restrictions on telematics data usage.
• In October 2023, Progressive Insurance announced collaborations with policymakers to create a framework for consumer data privacy in telematics-based UBI programs.
• In November 2023, AXA introduced a compliance-driven UBI solution to comply with new data-sharing guidelines in Europe.

The regulatory measures not only safeguard consumer rights but also stimulate innovation in the automotive UBI market, paving the way for its sustained growth.

The global automotive usage-based insurance market is set to surge by incorporating innovative technologies like telemetry devices, user-friendly mobile applications, and novel data analytics platforms. It is set to enable vendors to differentiate themselves in a rapidly changing market.

Companies are partnering with digital firms, data analytics specialists, and automotive manufacturers to enhance the value proposition of their UBI solutions. They are aiming to create more efficient insurance offerings that meet consumer needs.

Businesses are investing heavily in creating comprehensive instructional materials, prioritizing proactive customer support. They are also enhancing user experience with intuitive interfaces for easier navigation and usability.

Recent Industry Developments

• In August 2024, Zuno General Insurance introduced the Pay How You Drive (PHYD) feature, allowing users to assess driving skills, earn points, and receive up to 30% discounts on annual insurance premiums.
• In June 2024, Intuit planned to acquire Zendrive and its employees to accelerate the development of Karma Drive, a usage-based auto insurance product by Credit Karma, set to close in Q4 2024.
• In June 2024, Genesys International launched India's first AI-powered navigation map, enhancing driving experiences with augmented reality and intelligent speed assistance, and introducing five new products.
• In February 2024, Mazda planned to launch its car insurance service, offering exclusive perks and discounts to its ‘Mazda Insiders’ community, following its success with the CX-60 crossover SUV.
• In February 2023, HDVI introduced the second generation of its Shift product, enhancing fleet safety through real-time telematics data, and allowing up to 20% monthly premium savings.