3 Reasons Usage Based Insurance is Driving Billions of Dollars in Global Telematics Market Growth
It’s not hard to understand and forecast why usage based insurance (UBI) — otherwise known as behaviour-based insurance or pay-as-you-drive (PAYD) — is becoming popular among North American drivers and rest of the world. With improved governmental regulations and technology market penetration the industry estimates the automotive telematics market is expected to grow at a CAGR of 23 – 24 % over the next few years.
By using cutting-edge technology to closely monitor the driving behaviour of automotive insurance customers, insurance providers are being given a more accurate picture of how their clients drive. The result: many drivers are being rewarded for their good on-road behaviour through declining premiums and more money in their wallets at the end of the month.
Given this situation and the upward market trend of telematics reaching over $100 billion by 2022, it’s not particularly surprising that some insurance companies, such as Progressive, have seen usage based insurance programs become steadily more popular over the last couple of years. Today, Progressive has over 25 Billion miles logged through Snapshot and roughly 19,000,000 policies in force.
The rising satisfaction and retention of UBI isn’t just due to the fact that more drivers are saving money on their automotive insurance. It’s also the result of rapidly evolving automotive telematics technology, the hardware and software involved in helping insurance companies track driver behaviour in a safe, secure, and accurate way.
When automotive telematics and usage based insurance emerged a few years ago, most insurance providers used wireless devices that plugged into a vehicle’s on-board diagnostics (or OBD-II) port to receive information about a driver’s on-road behaviour. However, over the past year or so this approach has changed, with more and more insurance providers taking advantage of significant enhancements in smartphone technology. Today, smartphone telematics — and specifically the sensors found inside most popular smartphones from companies like Apple and Samsung — can help insurance providers understand more than ever about their customers’ driving habits.
With premiums declining, it’s obvious why many drivers would opt for a usage based insurance program over the traditional automotive insurance policy. But what do insurance companies have to gain from implementing behaviour-based insurance programs? Is it worth all of the hassle just to get a more accurate picture of how their customers drive? Or is there more to it than that?