Market Trends of Insurance Telematics Industry
Pay-How-You-Drive Segment to Hold Significant Market Share
- Pay-how-you-drive (PHYD) is a new innovative concept that has recently started to be commercialized in the region. The main idea is that drivers pay a premium based on their driving behavior and degree of exposure instead of a fixed price. Even though it has been implemented only for a few years, it is proven to be an up-and-coming practice with a significant potential impact on traffic safety.
- This is achieved by the financial incentive given to drivers to improve driving behavior, such as reducing harsh braking and acceleration events or reducing the degree of exposure, such as annual mileage, the time of the day traveling, etc., reducing traffic risk. It can also be beneficial toward other social objectives such as traffic congestion and pollution emission reduction.
- Pay-how-you-drive insurance is a type of motor vehicle insurance that considers how users drive. This means users driving habits dictate their premiums, i.e., speeding, braking, parking, positioning, stops, etc.
- In pay-how-you-drive insurance policies, driving skills are considered the primary factor when setting premiums. If users are careful drivers who brake gradually and observe speed limits, among other rules, they are considered skilled drivers, which translates to lower premiums.
- Insurers can assess their driving skills by installing telematics tracking devices to record driving information, i.e., speed, braking, sudden/gradual stops, acceleration, concentration, etc. The information is then relayed to the insurer. Many insurers offer clients online access to this data, helping individuals monitor their driving.
- The advent of electric vehicles is expected to pave the way in the insurance telematics industry. This is because of several government regulations supporting electric vehicles and rapid launches by auto companies. The advent of electric vehicles is expected to pave the way in the insurance telematics industry. This is because of several government regulations supporting electric vehicles and rapid launches by auto companies. According to the IEA report, the sales of electric vehicles reached 8 million in China, 3.4 million in Europe, and 1.6 million in the United States in 2023, compared to 6 million in China, 2.7 million in Europe, and 1 million in the United States in 2022.
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North America Holds Largest Market Share
- Decreasing the cost of development and technology, altering consumer behavior, and stringent government regulations drive the growth of the country's market. In the United States, consumers prefer usage-based insurance (UBI) snapshot programs. In other regions, motor insurance telematics policies are preferred.
- Introducing insurance telematics has several advantages for insurers and consumers, which are expected to fuel market growth. For consumers, it will promote safe driving, resulting in the reduction of accident severity and frequency. Over the forecast period, the insurers' claim-handling expenses will likely decrease by at least half, contributing to the market's growth.
- Various US consumers are switching insurers because their premiums have increased despite driving less. Lockdown measures during the pandemic resulted in consumers driving less, laying bare the inflexibility of traditional coverage that doesn't typically adapt its premiums to changing habits. This pushed more policyholders to demand behavior-based pricing. It can offer lower premiums by analyzing auto usage and behavioral data to personalize mileage-based policies.
- According to Lloyd's of London, the value of the motor vehicle insurance sector in the United States is expected to amount to approximately USD 224.7 billion in 2015. It was projected to grow to about USD 358.51 billion by 2025.
- Furthermore, mobile apps with ADAS (advanced driver assistance systems) technologies are a crucial headway for fleet management in Canada since it has faced a few challenges over the past few years. Hence, the above-cited aspects project remunerative opportunities for the telematics insurance market across the North American region over the forecast years.
- For instance, in April 2024, Aviva Canada launched a new initiative to help motorists enhance their driving and potentially save money at renewal. The new proposition, MyDrive, will monitor motorists' driving habits through their smartphones and guide them to help them drive safely. It will use telematics technology to evaluate accelerating, braking, speed, cornering, and phone usage.
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