Global Usage-Based Insurance Market Growth, Share, Size, Trends and Forecast (2025 - 2031)

The Global Usage-Based Insurance Market has been segmented by Package Type, Technology, Vehicle Type, Vehicle Age, Device Offering, Electric & Hybrid Vehicle and Geography, driven by advancements in telematics, data analytics, and the rising demand for personalized insurance plans. UBI allows insurers to assess risk based on actual driving behavior rather than traditional demographic factors, leading to more accurate pricing and fairer premiums for consumers. The market is segmented by package type, technology, vehicle type, vehicle age, device offering, and electric & hybrid vehicle categories, reflecting the diverse applications and adoption of UBI solutions worldwide. As connected vehicle technology continues to improve, insurers are leveraging real-time data to offer more dynamic and customized insurance plans, benefiting both policyholders and providers.

One of the key drivers of UBI adoption is the integration of advanced telematics and mobile-based applications that collect and analyze driver behavior, such as speed, acceleration, braking, and mileage. These technologies enable insurers to offer different types of UBI models, including pay-as-you-drive (PAYD) and pay-how-you-drive (PHYD), which provide cost savings for safer drivers. The increasing penetration of IoT devices, GPS tracking, and smartphone-based insurance platforms is further propelling market growth. Additionally, regulatory support for data-driven insurance models and the push for road safety improvements are encouraging both insurers and consumers to shift toward UBI policies.

The market is also witnessing strong demand from the electric and hybrid vehicle segment, where UBI is being utilized to tailor policies based on vehicle usage patterns and battery efficiency. As electric vehicle (EV) adoption grows, insurers are developing specialized UBI packages that consider factors like charging frequency, driving range, and regenerative braking behavior. This shift aligns with the global push toward sustainability, as insurance companies look to incentivize eco-friendly driving habits. Looking ahead, innovations in AI-powered risk assessment, integration with connected car ecosystems, and regulatory advancements will continue to shape the trajectory of the Global Usage-Based Insurance Market, making it a key player in the evolving automotive and insurance landscape.

Global Usage-Based Insurance Segment Analysis

In this report, the Global Usage-Based Insurance Market has been segmented by Package Type, Technology, Vehicle Type, Vehicle Age, Device Offering, Electric & Hybrid Vehicle and Geography.

Global Usage-Based Insurance Market, Segmentation by Package Type

The Global Usage-Based Insurance Market has been segmented by Package Type into Pay-As-You-Drive (PAYD), Pay-How-You-Drive (PHYD) and Manage-How-You-Drive (MHYD).

The Global Usage-Based Insurance (UBI) Market is segmented by package type into Pay-As-You-Drive (PAYD), Pay-How-You-Drive (PHYD), and Manage-How-You-Drive (MHYD), each catering to different driver behavior and usage patterns. Pay-As-You-Drive (PAYD) is a mileage-based insurance model where premiums are determined primarily by the distance driven. This package benefits low-mileage drivers, such as those who use their vehicles occasionally or rely on alternative transportation methods. PAYD encourages responsible vehicle use by offering lower premiums to those who drive less, making it an attractive option for urban drivers and individuals looking for cost savings.

Pay-How-You-Drive (PHYD) takes a more dynamic approach by assessing driving behavior in addition to mileage. Insurers monitor factors such as speed, acceleration, braking patterns, and adherence to traffic rules to determine the policyholder’s risk profile. Safe and responsible drivers can receive discounts on their premiums, while reckless driving may lead to higher insurance costs. This package incentivizes safer driving habits and is particularly popular among fleet operators and younger drivers who can benefit from lower insurance rates by demonstrating responsible driving behavior.

Manage-How-You-Drive (MHYD) is an advanced UBI model that not only tracks driving behavior but also provides real-time feedback and coaching to help drivers improve their habits. This package is widely adopted by commercial fleet operators and businesses looking to enhance driver safety, reduce fuel consumption, and lower overall operational costs. MHYD utilizes telematics and connected vehicle technologies to provide actionable insights, helping companies implement proactive risk management strategies. As the demand for road safety and data-driven insurance policies continues to rise, the MHYD model is expected to gain significant traction in both personal and commercial vehicle segments.

Global Usage-Based Insurance Market, Segmentation by Technology

The Global Usage-Based Insurance Market has been segmented by Technology into OBD-II, Smartphone, Black Box and Embedded.

The Global Usage-Based Insurance (UBI) Market, segmented by technology, includes OBD-II, Smartphone, Black Box, and Embedded solutions, each offering unique advantages in tracking and analyzing driving behavior. OBD-II (On-Board Diagnostics II) technology is one of the most widely used solutions in UBI programs. It involves plugging a telematics device into a vehicle’s OBD-II port to collect data on driving patterns, vehicle health, and mileage. This method is popular due to its ease of installation, accuracy, and compatibility with most modern vehicles. Insurers use OBD-II-based UBI to offer personalized premiums, rewarding safe drivers with lower insurance costs while reducing risks for providers. However, OBD-II devices are gradually being supplemented or replaced by more advanced telematics solutions.

Smartphone-based UBI has gained popularity due to its accessibility and cost-effectiveness, eliminating the need for external hardware. These systems use mobile applications to monitor driving behavior, leveraging GPS, accelerometers, and gyroscopes to track speed, braking, acceleration, and even phone usage while driving. Smartphone-based UBI is particularly appealing to insurers and consumers due to its low implementation cost and widespread smartphone adoption. However, challenges such as battery drain, app reliability, and potential inaccuracies due to phone handling can affect data quality. Despite these concerns, advancements in AI-driven analytics are helping improve the precision of smartphone-based telematics, making it a key growth segment in the UBI market.

Black Box and Embedded technologies represent more advanced and integrated approaches to UBI. Black box telematics devices, typically installed by insurers, offer high accuracy and secure data collection, making them ideal for young and high-risk drivers. These devices continuously record vehicle and driving data, enabling insurers to assess risk comprehensively. Meanwhile, embedded telematics, pre-installed by vehicle manufacturers, is emerging as the future of UBI. These factory-fitted solutions provide seamless data integration, allowing insurers to access real-time insights without requiring additional hardware. As automakers continue integrating connected car technologies, embedded UBI solutions are expected to gain widespread adoption, offering insurers a scalable and efficient way to assess risk and optimize pricing models.

Global Usage-Based Insurance Market, Segmentation by Vehicle Type

The Global Usage-Based Insurance Market has been segmented by Vehicle Type into Light-duty Vehicle (LDV) and Heavy-duty Vehicle (HDV).

The Global Usage-Based Insurance (UBI) Market is segmented by vehicle type into Light-Duty Vehicles (LDV) and Heavy-Duty Vehicles (HDV), each serving different insurance needs based on driving patterns, risk factors, and operational requirements. Light-Duty Vehicles (LDV) include passenger cars, small vans, and pickup trucks primarily used for personal and small business transportation. UBI models such as Pay-As-You-Drive (PAYD) and Pay-How-You-Drive (PHYD) are widely adopted in this segment, allowing insurers to offer flexible pricing based on mileage and driving behavior. The increasing adoption of connected car technologies in LDVs has significantly enhanced the growth of UBI policies, making them more attractive to individual drivers seeking cost-effective insurance solutions.

Heavy-Duty Vehicles (HDV), including trucks, buses, and large commercial vehicles, require a different approach to UBI due to their extensive usage in logistics, construction, and public transportation. Manage-How-You-Drive (MHYD) is particularly beneficial for HDVs, as it enables fleet operators to monitor driver behavior, optimize fuel efficiency, and enhance road safety. Given the high operating costs and potential risks associated with HDVs, insurers use telematics to track key metrics such as harsh braking, excessive idling, and route efficiency, helping businesses reduce accident rates and maintenance expenses. UBI adoption in the HDV segment is growing rapidly, driven by the need for cost control and regulatory compliance in commercial fleet management.

Both LDV and HDV segments are experiencing strong growth in UBI adoption due to advancements in telematics, IoT, and real-time data analytics. LDVs benefit from UBI’s cost-saving potential for low-mileage and safe drivers, while HDVs leverage UBI for improved fleet management and risk mitigation. As insurance providers continue to refine their pricing models using AI and big data, the demand for UBI in both vehicle segments is expected to rise, leading to increased transparency, fairer premiums, and enhanced safety on the roads.

Global Usage-Based Insurance Market, Segmentation by Vehicle Age

The Global Usage-Based Insurance Market has been segmented by Vehicle Age into New Vehicle and On-Road Vehicle.

The Global Usage-Based Insurance (UBI) Market, segmented by vehicle age, includes New Vehicles and On-Road Vehicles, each influencing UBI adoption and implementation differently. New vehicles, particularly those equipped with factory-installed telematics systems, are driving the adoption of embedded UBI solutions. Automakers are increasingly integrating connected technologies that enable seamless data sharing with insurers, eliminating the need for external hardware like OBD-II devices or black boxes. As a result, insurers can access real-time driving data from new vehicles, allowing for more precise risk assessment and tailored insurance policies. The rising demand for connected cars, coupled with regulatory support for telematics-based insurance, is expected to accelerate UBI adoption among new vehicle owners.

On-road vehicles, which include older and existing vehicles currently in use, represent a significant portion of the UBI market. Unlike new vehicles with built-in telematics, these vehicles require additional hardware such as OBD-II devices, black boxes, or smartphone-based tracking solutions to enable UBI programs. Many insurers offer retrofitted telematics solutions to expand their UBI coverage to this segment, providing drivers with cost-saving incentives based on safe driving behavior. While adoption rates are slightly lower compared to new vehicles, growing consumer awareness of UBI benefits, along with insurers’ push for wider market penetration, is driving steady growth in this segment. Additionally, smartphone-based UBI solutions are becoming a popular choice for on-road vehicle owners due to their affordability and ease of use.

Both new and on-road vehicles play a crucial role in the expansion of the UBI market, with technology advancements ensuring wider accessibility. The shift toward connected and autonomous vehicles will likely increase UBI adoption in the new vehicle segment, while continuous improvements in aftermarket telematics solutions will enhance penetration among on-road vehicles. As insurers refine their offerings and consumers become more aware of usage-based pricing benefits, both segments are expected to contribute significantly to the overall growth of the UBI market. Moving forward, partnerships between automakers, insurers, and technology providers will be essential in shaping the future of vehicle-age-based UBI segmentation.

Global Usage-Based Insurance Market, Segmentation by Device Offering

The Global Usage-Based Insurance Market has been segmented by Device Offering into Bring Your Own Device (BYOD) and Company Provided.

The Global Usage-Based Insurance (UBI) Market is segmented by device offering into Bring Your Own Device (BYOD) and Company Provided, each catering to different user preferences and technological capabilities. Bring Your Own Device (BYOD) allows policyholders to use their personal smartphones or existing telematics-enabled devices to track driving behavior. This model is gaining popularity due to its convenience, cost-effectiveness, and ease of adoption, as it eliminates the need for additional hardware. Insurers leverage mobile apps and GPS-based tracking to monitor mileage, acceleration, braking, and speed, making UBI more accessible to a wider audience, including individual drivers and small businesses.

On the other hand, Company Provided devices include insurer-installed telematics hardware such as OBD-II (On-Board Diagnostics) devices, black boxes, and embedded vehicle systems. These devices offer higher accuracy in tracking driving behavior and vehicle performance, making them ideal for commercial fleets and high-risk drivers who require detailed monitoring. Company-provided solutions also enhance data security and reliability, ensuring that insurers receive tamper-proof and real-time driving data. This model is particularly favored by insurance companies looking to maintain greater control over data collection and analysis.

Both BYOD and Company Provided offerings play a crucial role in the expansion of the UBI market, catering to different segments based on cost, convenience, and data accuracy needs. While BYOD solutions appeal to tech-savvy consumers seeking affordability and flexibility, Company Provided devices are preferred by businesses and high-risk policyholders requiring comprehensive driving insights. As telematics and AI-driven analytics continue to evolve, insurers are expected to offer hybrid models, combining the benefits of both approaches to enhance personalization, pricing accuracy, and risk assessment in the UBI market.

Global Usage-Based Insurance Market, Segmentation by Electric & Hybrid Vehicle

The Global Usage-Based Insurance Market has been segmented by Electric & Hybrid Vehicle into Battery Electric Vehicle (BEV), Hybrid Electric Vehicle (HEV) and Plug-in Hybrid Vehicle (PHEV).

The Global Usage-Based Insurance (UBI) Market, segmented by Electric & Hybrid Vehicle types, includes Battery Electric Vehicles (BEV), Hybrid Electric Vehicles (HEV), and Plug-in Hybrid Vehicles (PHEV). Battery Electric Vehicles (BEV), which rely entirely on electric power, represent a growing segment within the UBI market. As BEVs become more popular, insurers are increasingly offering UBI policies tailored to the specific needs and characteristics of electric vehicles. These policies often consider factors such as battery efficiency, range, charging habits, and energy consumption. Telematics systems in BEVs can provide detailed insights into driving behavior, allowing insurers to offer more personalized pricing models based on actual usage rather than traditional risk assessment factors.

Hybrid Electric Vehicles (HEV) combine both an internal combustion engine and an electric motor, requiring unique considerations for UBI programs. Since HEVs switch between electric and gasoline power, insurers need to account for both driving modes when assessing risk. UBI programs for HEVs focus on monitoring fuel efficiency, driving patterns, and the frequency of electric-only driving, as these vehicles tend to have different operating behaviors compared to traditional internal combustion engine vehicles. By tracking the efficiency and sustainability of drivers’ usage, insurers can offer tailored premiums that reward eco-friendly driving behaviors, leading to cost savings for consumers and promoting environmental responsibility.

Plug-in Hybrid Vehicles (PHEV), which can be charged externally and operate on both electricity and gasoline, present a slightly different dynamic in the UBI market. PHEVs offer insurers the ability to track driving behavior in electric mode and gasoline mode separately. This segmentation allows UBI programs to create more detailed and accurate risk profiles based on how frequently the vehicle is driven in electric mode versus hybrid mode. Insurers can reward drivers who use the electric mode more often, aligning with sustainability goals and offering lower premiums for those who demonstrate environmentally conscious driving patterns. As the adoption of electric and hybrid vehicles continues to rise, UBI solutions will become more crucial in accurately assessing risk and providing value-based, flexible pricing models that cater to the specific needs of BEVs, HEVs, and PHEVs.

Global Usage-Based Insurance Market, Segmentation by Geography

In this report, the Global Usage-Based Insurance Market has been segmented by Geography into five regions; North America, Europe, Asia Pacific, Middle East and Africa and Latin America.

Global Usage-Based Insurance Market Share (%), by Geographical Region, 2024

The global usage-based insurance (UBI) market is dominated by North America, which holds a significant share due to the widespread adoption of telematics technology and strong regulatory support for innovative insurance models. The United States, in particular, has seen rapid growth in UBI adoption, with major insurance providers integrating telematics solutions into their offerings. The high penetration of connected vehicles and the presence of leading telematics providers have further accelerated market expansion. Additionally, consumers in North America are increasingly drawn to pay-as-you-drive (PAYD) and pay-how-you-drive (PHYD) models, as they offer cost savings and rewards for safe driving behavior.

Europe also holds a considerable share of the global UBI market, driven by stringent road safety regulations and the European Union's push for telematics-based insurance solutions. Countries such as the UK, Italy, and Germany have been at the forefront of UBI adoption, with insurers leveraging connected car data to offer personalized insurance plans. Italy, in particular, has one of the highest UBI adoption rates due to government incentives and regulations encouraging telematics-based policies. Additionally, increasing environmental concerns and efforts to reduce traffic congestion have contributed to the growing preference for UBI solutions that promote efficient and responsible driving.

The Asia-Pacific region is witnessing rapid growth in the UBI market, with countries such as China, India, and Japan emerging as key players. The increasing adoption of connected vehicles, rising smartphone penetration, and a growing middle-class population are driving demand for usage-based insurance solutions in these markets. Insurers in the region are partnering with automakers and technology providers to offer telematics-driven insurance plans that cater to digitally savvy consumers. While adoption levels are still lower compared to North America and Europe, the expansion of digital infrastructure and the growing acceptance of data-driven insurance models are expected to propel Asia-Pacific’s UBI market share in the coming years.

This report provides an in depth analysis of various factors that impact the dynamics of Global Usage-Based Insurance Market. These factors include; Market Drivers, Restraints and Opportunities Analysis.

Drivers, Restraints and Opportunity Analysis

Drivers

• Growing Adoption of Telematics and Connected Vehicle Technologies
• Increasing Demand for Personalized and Cost-Effective Insurance Solutions
• Government Regulations Encouraging Road Safety and Telematics-Based Insurance
• Rising Popularity of Pay-As-You-Drive (PAYD) and Pay-How-You-Drive (PHYD) Models
• Expansion of IoT, Big Data Analytics, and AI in Insurance Underwriting:

  The expansion of IoT, Big Data analytics, and AI is transforming insurance underwriting, particularly in the usage-based insurance (UBI) market. IoT-enabled devices, such as telematics systems and connected car sensors, provide real-time data on driving behavior, vehicle health, and environmental conditions. This continuous stream of data allows insurers to move away from traditional risk assessment models based on historical data and general demographics, instead offering highly personalized policies tailored to individual driving habits. By leveraging IoT, insurers can assess risk more accurately, leading to fairer pricing and better policyholder engagement.

  Big Data analytics plays a crucial role in processing and interpreting the vast amounts of data generated by IoT devices. Advanced algorithms analyze driving patterns, mileage, acceleration, braking intensity, and even road conditions to determine the likelihood of accidents or vehicle wear and tear. Insurers use these insights to refine pricing models, detect fraudulent claims, and optimize customer segmentation. Additionally, predictive analytics enables insurers to forecast risks more effectively, allowing them to take proactive measures such as offering safety recommendations to policyholders or adjusting premiums in real time based on changing driving behaviors.

  AI further enhances insurance underwriting by automating decision-making and improving efficiency. Machine learning algorithms continuously learn from new data inputs, improving the accuracy of risk assessment models over time. AI-driven underwriting not only speeds up policy approvals but also enhances fraud detection by identifying inconsistencies in reported and actual driving behavior. Moreover, AI chatbots and virtual assistants are being integrated into customer service, providing instant feedback on policy options, premium estimates, and claim processing. As IoT adoption grows and AI technology evolves, insurers will continue to refine their underwriting processes, making UBI models more dynamic, efficient, and customer-centric.

Restraints

• Data Privacy and Security Concerns Among Consumers
• High Initial Costs for Telematics Implementation and Integration
• Resistance to Continuous Monitoring and Consumer Awareness Challenges
• Regulatory Uncertainties and Differences Across Regions
• Limited Availability of Advanced Telematics Infrastructure in Developing Markets:

  The limited availability of advanced telematics infrastructure in developing markets poses a significant challenge for the widespread adoption of usage-based insurance (UBI) models. Telematics relies on a network of connected devices, sensors, and communication systems to collect and transmit real-time data on driving behavior and vehicle performance. In many developing regions, the lack of robust digital infrastructure, including reliable internet connectivity and mobile networks, hampers the deployment of telematics solutions. Without these foundational technologies, insurers and customers alike are unable to fully leverage the benefits of UBI, such as personalized insurance pricing and enhanced risk assessment capabilities.

  In addition to connectivity challenges, the cost of implementing telematics systems can be prohibitively high for both insurers and consumers in developing markets. The upfront costs associated with installing IoT devices in vehicles and integrating telematics infrastructure into insurance platforms may limit access for lower-income populations or small businesses that operate fleets. Moreover, the lack of local expertise in managing and maintaining telematics equipment further exacerbates the problem, as insurers and vehicle owners may struggle to ensure that systems remain operational and up to date. This creates a barrier to entry for insurers seeking to expand their UBI offerings into these regions.

  Despite these challenges, there are significant opportunities for growth in developing markets as telematics infrastructure continues to evolve. Governments and private enterprises are increasingly investing in digital infrastructure to support smart cities, improved connectivity, and digital financial services, which will, in turn, support the adoption of telematics-based insurance solutions. Mobile-based telematics apps, which are less reliant on expensive hardware and can work on smartphones, are also emerging as a viable alternative for introducing UBI in these regions. As digital ecosystems mature and costs decline, the adoption of UBI and telematics technology is expected to rise, enabling insurers to tap into previously underserved markets while offering affordable and innovative insurance solutions.

Opportunities

• Expansion of UBI in Emerging Markets with Growing Vehicle Connectivity
• Integration of Blockchain for Secure and Transparent Insurance Processes
• Advancements in AI and Machine Learning for More Accurate Risk Assessment
• Growth of Electric and Shared Mobility Services Requiring Flexible Insurance Models
• Strategic Partnerships Between Insurers, Automakers, and Telematics Providers:

  Strategic partnerships between insurers, automakers, and telematics providers are becoming increasingly critical to the success and expansion of the usage-based insurance (UBI) market. Automakers and telematics companies have the technological expertise to embed telematics devices into vehicles, providing insurers with real-time data on driving behavior, vehicle diagnostics, and other performance metrics. By collaborating, these three parties can create seamless, integrated solutions that not only enhance the customer experience but also enable insurers to offer more accurate risk assessments and personalized pricing models. Such partnerships allow insurers to access data directly from vehicles, reducing the reliance on manual reporting and ensuring more accurate and timely information.

  For insurers, these partnerships offer a competitive advantage by facilitating the development of data-driven, customized insurance policies that appeal to a broader customer base. By working directly with automakers, insurers can tap into emerging technologies in the automotive industry, such as connected car platforms and electric vehicles, which are expected to play a significant role in the future of telematics-based insurance. Furthermore, telematics providers help bridge the gap between insurance companies and vehicles by offering advanced sensor technology and analytics platforms that can monitor driver behavior, road conditions, and vehicle health. This collaboration leads to more efficient underwriting processes, improved fraud detection, and better claims management, ultimately benefiting both insurers and policyholders.

  Additionally, the growing trend of shared mobility services, such as ride-sharing and car-sharing, has created new opportunities for strategic alliances. As these services increase in popularity, there is a rising demand for flexible, usage-based insurance models that cater to the unique needs of these fleets. Through partnerships with automakers and telematics providers, insurers can offer policies tailored to shared mobility operators, ensuring appropriate coverage for fluctuating usage patterns and variable driving behaviors. As a result, these strategic collaborations not only foster innovation in the UBI market but also pave the way for more dynamic, responsive insurance offerings that align with the rapidly evolving transportation landscape.