Emerging technologies such as telematics and the connected car are painting a positive picture of the future usage based insurance market, according to a new report from IHS Automotive.
In its study, “Auto Tech Report–Usage Based Insurance-2016”, IHS projects the number of globally distributed UBI policies will surpass 142 million by 2023. This compared to 12 million last year and 7.7 million in 2014.
The market, however, will look completely different then, the analyst firm says. Ride sharing will prove to be very popular among millennials, allowing smartphone applications to dominate until the connected car arrives and becomes the ultimate UBI device.
“UBI fits in very nicely with buzzwords like connected car and millennials,” said Stacey Oh, manager, automotive technology at IHS. “Millennials are less open to owning cars of their own and are more apt to share. Pay-per-mile driving and mobile apps like Uber and Lyft also fit in well with UBI."
Due to sheer market size, the U.S. will lead the way in UBI deployment in the coming year, IHS says. According to company estimates, more than five million UBI policyholders drove in the U.S. last year, the most of any country. Italy was a distant second with just 3.6 million.
Italy and the United Kingdom represent the most mature UBI markets in Europe. Product uncertainty and privacy concerns have plagued growth across the rest of the continent. To date, Italy is the only country worldwide where UBI makes up a double digit share of its insurance market, at 10%. To be sure, the nation has roughly 37 million cars in use, compared to 260 million vehicles in the U.S.
A key market to watch going forward is China, Oh says, which began allowing carriers to operate in the country in 2012. Approximately, 15 insurers will launch UBI pilot programs in China this year. Its market size, second only to the U.S., will allow subscriber volumes to grow from 50,000 in 2015 to 22 million by 2023, according to forecasts.
“UBI was originally marketed as the next hot thing, but hasn’t really picked up the way some would have hoped,” said Oh. “Now data aggregators, car manufacturers and lots of non-insurance companies are eager to get into the space.”
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