The future of usage-based insurance (UBI) is bright, according to a report released earlier this week by IHS Automotive. UBI allows insurance companies to more closely align premiums with driver behavior: by capturing real-time data about a driver’s performance using telematics, companies can more accurately predict the driver’s future risk.
When the concept was first introduced about a decade ago, high expectations for its revolutionary impact seemed misplaced–UBI was slow to take off. According to IHS, however, that is no longer the case. As IHS manager of automotive technology Stacey Oh put it, “the current UBI landscape is in transition with robust expansion.”
Oh’s comment seems like an understatement when placed alongside the actual numbers. The report predicts that globally distributed UBI policies will balloon to 142 million by 2023, up from 12 million in 2015 and a mere 7.7 million in 2014.
As the largest car insurance market globally, the U.S. is expected to lead the charge, both in implementation and in innovation. IHS estimates that there were already more than 5 million UBI policyholders in the country in 2015. Although Italy and the United Kingdom are two notably mature UBI markets in Europe, it seems that the other major player to watch in the coming years is in fact China. China recently opened its market to foreign insurance carriers leading IHS to predict that the Chinese market will grow from 50,000 UBI policies to over 22 million by 2023.
Not surprisingly, the report explores the role of Millennials in encouraging this industry shift. IHS finds that the Millennial pay-per-ride mentality will translate into their disposition towards insurance: Millennials are looking for something that is tailored to their activities.
The mass adoption and use of a smartphone means that, in the near term future, apps like TrueMotion’s that use smartphone sensors to track and report on driving behaviors will be a big part of UBI’s growth.
Yet the report also projects that tracking technology will ultimately be fully “baked-in” to the operating system of the car, making additional hardware or smartphone apps moot.
We respectfully disagree. For one, there is tremendous benefit to using a smartphone app in concert with an in-vehicle app. More data points are always better than fewer. But our real reason for optimism about the future is the insights from the data, regardless of how it is collected.
We’re developing an incredible big data analytics system that uses the best of human and machine learning to separate the signal from the noise when it comes to the data in our system. Whether that’s sourced from an in-vehicle telematics solution or a smartphone based app (or both), we’re excited by what we can learn and show drivers to help continue to make the roads safer for all.