The global automotive usage-based insurance (UBI) market is on a transformative growth trajectory, with the segment estimated to reach US$ 69.8 billion in 2025, and projected to expand at a compound annual growth rate (CAGR) of 21.3% through the assessment period to achieve US$ 270.3 billion by 2032. This rapid expansion reflects shifting consumer preferences, advances in connected technologies and mounting pressure on insurers to provide more personalised, risk-sensitive products.

In 2025, the automotive usage-based insurance market is forecast to attain approximately US$ 69.8 billion, signalling robust adoption of telematics-enabled insurance models. From this base, the market is expected to grow at a CAGR of 21.3% through to 2032, culminating in a market size of US$ 270.3 billion. This forecasted growth underscores the accelerating shift away from traditional static insurance premium models towards dynamic, behaviour-driven pricing frameworks.

Several key forces are driving this growth: the increasing global fleet of connected vehicles equipped with telematics, smartphones and embedded sensors; insurers’ need to differentiate themselves through value-added services and usage-based models; regulatory and environmental pressures promoting safer driving and reduced vehicle usage; and rising consumer demand for fairness and transparency in insurance pricing. At the same time, cost pressures borne by insurers—especially from large loss events and rising vehicle repair costs—are encouraging the adoption of usage-based models that enable more accurate risk selection and pricing.

Moreover, as mobility patterns evolve (including shared mobility, ride-hailing, and electrification of vehicles), usage-based insurance presents an adaptable framework that aligns premiums with actual usage, driving conditions and behaviour—rather than simply demographics and fixed annual mileage. The confluence of these factors—telematics penetration, regulatory motivation, cost optimisation and consumer desire for flexible premiums—creates a favourable environment for the UBI market’s expansion.

Automotive Usage-based Insurance Market Segmentation

By Type     

• Pay-As-You-Drive (PAYD)
• Pay-How-You-Drive (PHYD)
• Pay-As-You-Go (PAYG)
• Manage-How-You-Drive (MHYD)

By Technology

• OBD-II-based UBI
• Smartphone-based UBI
• Black Box-based UBI
• Embedded System-based UBI
• Others

By Vehicle Usage  

• New Vehicle
• Old Vehicle

By Vehicle Type

• Passenger Vehicles
• Commercial Vehicles

By Region

• North America
• Europe
• East Asia
• South Asia and Oceania
• Latin America
• Middle East and Africa

By Propulsion / Technology / Channel

Usage-based insurance is also influenced by propulsion (e.g., internal-combustion vs electric vehicles), telematics technology (smartphone sensors, On-Board Diagnostics (OBD) II, embedded OEM telematics modules, black-box hardware) and distribution channel (direct insurers, brokers, OEM alliances, mobility providers). The uptake of electric vehicles (EVs) and hybrids presents opportunities, as these vehicles often come with more advanced connectivity and data capabilities—enabling richer usage-based insurance analytics. Additionally, distribution channels are diversifying: insurers are partnering with OEMs to offer embedded UBI programmes, collaborating with mobility platforms and integrating UBI into vehicle-purchase or lease agreements. As telematics and connectivity become more prevalent, the channel complexity and technology sophistication will increase, driving growth of the UBI ecosystem.

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Regional Insights

On a regional basis, North America currently leads the global automotive usage-based insurance market. The region benefits from high levels of vehicle connectivity, established insurance-telematics programmes, supportive regulatory frameworks and mature consumer demand for usage-based models. For example, in North America the UBI market size in 2024 was estimated at approximately US$ 24.6 billion, with forecast to reach US$ 116.1 billion by 2032 (CAGR ~21.4 %).

Europe and Asia-Pacific also represent substantial and growing opportunities. Europe has a strong telematics infrastructure, and regulatory initiatives—such as mandatory emergency-call systems (eCall) and connected-car mandates—are accelerating the adoption of usage-based insurance. Meanwhile, Asia-Pacific is emerging as the fastest-growing region due to strong vehicle growth (particularly in China and India), rising consumer awareness, rapid smartphone penetration, and growing regulatory incentives. The combination of new vehicle fleets, reduced premium sensitivity, and appetite for digital insurance solutions renders Asia-Pacific a compelling growth frontier.

Within regions, emerging markets in Latin America, Middle East & Africa (MEA) are also gaining traction, albeit from a smaller base, as insurers experiment with UBI pilots and telematics roll-outs. Regulatory frameworks and infrastructure maturity remain limiting factors in some of these geographies, yet the growth potential is significant as connectivity and mobility evolve.

Unique Features and Innovations in the Market

What differentiates the modern automotive usage-based insurance market from earlier telematics-based models is the deep integration of advanced technologies and service-layer innovation. Key differentiators include:

• Artificial Intelligence (AI) and Machine Learning (ML): Insurers are deploying AI/ML models to refine risk scoring based on real-time driving behaviour, near-miss event detection, predictive analytics, and personalised feedback loops. This allows sharper differentiation between safe drivers and higher-risk profiles.
• Internet of Things (IoT) and Connected Vehicle Data: Vehicles now act as rich data-sources—via embedded telematics modules, smartphones and OBD-II sensors—providing metrics such as acceleration, braking, cornering, lane-change events, time-of-day usage, road-type usage and even driver distraction or phone usage. The proliferation of IoT devices and low-cost sensors drastically lowers the barrier to monitor driving behaviour at scale.
• 5G and High-Bandwidth Connectivity: As 5G networks roll out, data can be transferred more rapidly and in higher volumes, enabling insurers to ingest richer data streams—including video or Lidar/Mobile sensor data—for usage-based insurance programmes. Real-time feedback and coaching are becoming feasible, enabling dynamic pricing or behaviour-based interventions.
• Embedded Telematics and OEM Partnerships: Automakers increasingly embed telematics modules in new vehicles, enabling direct cooperation between OEMs and insurers. This integration bypasses the need for aftermarket hardware and allows insurers to access richer vehicle and driver data from the factory.
• Value-Added Services and Driver Engagement: Beyond premium reduction, modern UBI programmes are bundling driver coaching apps, gamification, driver reward systems, fleet-management dashboards, and claims-service enhancements (e.g., stolen-vehicle recovery, accident detection, proactive maintenance). These features increase policyholder engagement and retention.
• Mobility-Service Linkages: As mobility shifts—from private ownership to shared fleets, ride-hailing and subscription models—usage-based insurance solutions are adapting to cover mixed-use, multi-driver, multi-modal vehicle usage. Insurers and mobility providers are co-designing models that allocate premiums based on actual usage patterns: miles driven, passengers carried, ride-share versus personal use, and vehicle type.

These innovations collectively are transforming usage-based insurance from a niche premium-discount offering into a full-scale risk-management and value-added insurance ecosystem.

Market Highlights

From a strategic business perspective, the automotive usage-based insurance market offers compelling value-propositions for insurers, vehicle manufacturers, fleet operators, mobility providers and ultimately consumers. Key reasons for adoption include:

• Cost Reduction and Improved Risk Selection: By capturing real-time driving data and correlating it with claims outcomes, insurers can more accurately price risk, reduce adverse selection, lower claims leakage and identify fraud more effectively. Usage-based models help align premiums with actual exposure rather than static rating factors.
• Enhanced Customer Retention and Engagement: UBI programmes allow insurers to interact with policyholders throughout the policy term—providing feedback, driver coaching, and reward systems—thus increasing loyalty and lowering churn. They shift the customer-insurer relationship from once-a-year renewal to a continuous engagement model.
• Regulatory Compliance and Safety Outcomes: As governments increasingly focus on road safety, emissions and behavioural interventions, usage-based insurance provides a mechanism to incentivise safer driving and lower vehicle usage. Some regulators are even encouraging or mandating telematics for young drivers, commercial fleets or high-risk segments.
• Sustainability and Mobility Shift Alignment: With growing emphasis on decarbonisation, shared mobility, reduced vehicle ownership and electrification, usage-based insurance aligns well with usage-centric mobility models. Drivers who use vehicles less (or more efficiently) benefit from lower premiums, which supports sustainable-mobility objectives.
• Revenue Diversification for Insurers & OEMs: For insurers, usage-based programmes open new channels and product innovations (e.g., pay-per-mile, pay-per-use, dynamic pricing). For OEMs, embedded UBI programmes provide new revenue streams, deeper customer insights and opportunities to partner with insurers or mobility providers.
• Improved Claims and Service Efficiency: Telematics data allows faster detection of incidents (accidents, theft, mis-use) and supports claims automation, real-time alerts, roadside assistance and even predictive maintenance. This reduces cost, enhances customer experience and strengthens insurer competitiveness.

Key Players and Competitive Landscape

The competitive landscape of the automotive usage-based insurance market is characterised by traditional insurance incumbents, pure-play insurtechs and telematics/analytics technology vendors. Notable players and their strategic positioning include:

• Progressive Corporation (U.S.): A pioneer in pay-as-you-drive insurance, Progressive’s “Snapshot” programme allows drivers to monitor their driving behaviour and receive discounts accordingly. The company holds patents covering usage-based insurance methods and continues to lead the market in telematics-based auto insurance innovation.
• Allstate Insurance Company (U.S.): Allstate has developed its “Drivewise” mobile application and telematics-enabled programmes to reward safe driving, reduce claims and improve policyholder engagement. Its strategy emphasises digital-first insurance products and partnerships with OEMs and mobility platforms.
• State Farm Mutual Automobile Insurance Company (U.S.): With its “Drive Safe & Save” usage-based insurance offering, State Farm monitors mileage, time-of-day usage and driving behaviour to calibrate premiums. It has also partnered with vehicle manufacturers to integrate telematics into new-car insurance offerings.
• Liberty Mutual Insurance (U.S.): Liberty Mutual has acquired telematics-technology assets (such as Insurance Portal Services) to build embedded-insurance capabilities. It has also partnered with OEMs to offer usage-based insurance in connected vehicles, demonstrating a technology-driven growth approach.
• AXA Group (France): AXA has expanded its UBI presence through partnerships with technology firms and vehicle manufacturers. The insurer emphasises digital-transformation, embedded telematics products and international expansion of usage-based programmes across Europe and Asia.
• Allianz SE (Germany): Allianz has invested in digital analytics, telematics startups and usage-based insurance platforms, enabling it to offer more precise risk pricing and integrated mobility-insurance propositions.
• Octo Telematics S.p.A. (Italy): A specialist in telematics and analytics, Octo provides the technological backbone for many usage-based insurance programmes worldwide. Its IoT-enabled platform supports insurers and OEMs with data collection, driver scoring and behavioural analytics.

Across the market, key strategies include: forming alliances with OEMs and mobility providers; embedding telematics modules at vehicle-manufacture stage; leveraging smartphone apps to reduce hardware costs; deploying AI/ML for risk scoring and near-real-time driver feedback; and rolling out usage-based programmes in emerging markets to capture first-mover advantages in telematics-under-penetrated regions.

Future Opportunities and Growth Prospects

Looking ahead, the automotive usage-based insurance market is poised for continued innovation and growth. Several vectors promise to shape the next phase of the industry:

• The increasing penetration of connected and autonomous vehicles will generate richer data streams—offering insurers the ability to refine pricing, intervene proactively and tailor services to mobility patterns rather than simply vehicle ownership.
• Expansion of mobility-as-a-service (MaaS), ride-hailing, car-sharing and subscription-based vehicle models will demand new insurance frameworks aligned to usage, driver profile, trip type and vehicle-pool utilisation. Usage-based insurance is ideally placed to serve this evolving mobility ecosystem.
• Electrification of vehicles presents opportunities for embedded telematics (already present in many EVs) and usage-based models that can reflect unique usage patterns (e.g., charging behaviours, regenerative braking, range usage) and support sustainability goals.
• Further integration of AI, big-data analytics and predictive modelling will allow insurers to detect near-miss events, anticipate risk exposures, provide driver coaching in real time and shift from reactive to proactive risk management.
• Regulatory developments and consumer awareness will continue to drive adoption. Governments encouraging telematics for commercial fleets, young drivers or high-risk segments (and mandating vehicle connectivity) create a favourable backdrop for usage-based insurance expansion.
• Emerging markets—particularly in Asia-Pacific, Latin America and MEA—offer significant growth potential as telematics infrastructure, smartphone penetration and digital-insurance acceptance improve. Insurers entering these markets with usage-based programmes may capture high-growth opportunities.

In summary, the convergence of advanced connectivity, data-driven risk models, shifting mobility paradigms and regulatory momentum will continue to propel the automotive usage-based insurance market. Insurers and mobility stakeholders that invest early, build scalable telematics platforms and deliver compelling driver-value propositions will be best positioned to lead in this rapidly evolving landscape.

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