November 23, 2016 by Canadian Underwriter
The global usage-based insurance (UBI) market is expected to garner US$123 billion by 2022, growing at a compound annual growth rate of 36.4% from 2016 to 2022, according to a new report from Allied Market Research (AMR).
According to the report, the short title of which is Usage-Based Insurance Market by Service Type, North America is expected to grow at the fastest pace during the forecast period, owing to the upsurge in demand from Canada and the United States. The report covers pay-as-you-drive insurance (PAYD), pay-how-you-drive insurance (PHYD), manage-how-you-drive insurance (MHYD) and others, such as smartphone-based, hybrid-based and black box-based UBI programs.
Increased penetration of UBI services in the United States and Canada will help North America witness the fastest growth rate, AMR said in a press release on Wednesday. “Popularity of such services has particularly increased among youth and teenagers, which is one of the major growth factors,” AMR reported, adding that the U.S. is witnessing increase in the demand of MHYD services owing to superior benefits of flexible driving and roadside assistance facilities.
Factors driving the UBI market include flexible insurance premium, lower accident and vehicle theft possibilities, accurate and timely data collection, and lower fuel consumption, said AMR, a full-service market research and business-consulting wing of Allied Analytics LLP, based in Portland, Ore.
According to the report, the PAYD product type segment accounted for the largest market share in 2015, due to its cost efficiency. MHYD is anticipated to grow at the fastest rate from 2016 to 2022, as it provides higher level of freedom and flexibility to customers.
In terms of market by technology, the black box technology segment accounted for the maximum market share in 2015, “as it is highly secure and reliable,” the release said. Smartphone technology is anticipated to witness fastest growth in the global UBI market, primarily driven by its convenience features.
“Consistent improvements in telematics based data collection and analysis techniques have led to the growth of usage-based insurance market,” said Sheetanshu Upadhayay, research analyst of consumer goods at AMR, in the release. “Insurance companies are diversifying into the business segment in order to capitalize upon the upcoming business opportunity.”
Europe accounted for largest revenue share in the UBI market in 2015, followed by North America. The Europe market is anticipated to grow at a notable pace in the coming years, owing to a rise in awareness towards drivers’ safety and increased penetration of such services among the youth population, the release said. Market penetration of PAYD is relatively higher in the region due to its cost efficiency.