The usage-based insurance (UBI) market is predicted to grow in the next five years. The increased number of vehicles embedded with telematics is one of the major factors driving growth. This tracking system allows insurance companies to calculate premiums based on the vehicle health, usage rate and driving behaviour.
The increasing penetration of smartphones to connect to on-board devices, enabling vehicles to share data with insurers is another factor for the growth of the UBI market. The “pay as you drive” (PAYD) is another segment to hold a dominant share. PAYD analyzes the data recorded by telematics devices and decides premiums accordingly. This helps to address unfair insurance practices.
UBI programs are becoming steadily popular!
Insurance companies can now closely monitor the driving behaviour of their customers – thanks to cutting-edge technology. This helps insurers have a more accurate picture of how their clients drive. As a result, drivers are rewarded for their good on-road behaviour saving more money through declined premiums.
The successful retention of usage-based insurance isn’t only because drivers are saving more on their premiums. But it’s also helping insurers track driver behaviour accurately. With premiums declining, it’s obvious a lot of drivers will get inclined towards UBI program instead of traditional automotive insurance.
When UBI and automotive telematics emerged a few years ago, most insurance providers used wireless devices to receive data about a driver’s on-road behaviour. These devices were plugged into a vehicle’s on-board diagnostics (or OBD-II) port. However, this approach has changed now. Today, a large number of insurance providers are taking advantage of smartphone telematics. It can help insurers understand more about their customers’ driving habits than ever.
We have listed two reasons why usage-based insurance is set to drive global telematics market growth.
1. It’s getting cheaper to offer
Earlier insurance companies used hardware options for monitoring driver behaviour. The cost of producing these wireless devices was much higher than many companies anticipated.
As much as lower automotive insurance payments are considered, smartphones manufacturer responded by adding a wide variety of sensors to their devices. This gave insurance companies an opportunity to have more insight into driver habits and reduce costs, making usage-based insurance even more attractive to both customers and providers.
2. Claim costs are going down
Usage-based insurance programs reward safer drivers with lower automotive insurance costs. As more customers flocking to UBI programs and demonstrating their safe driving habits, insurers are seeing substantial reductions in their claim costs, and also widening of profit margins.