Would you drive differently if your car insurance premium depended on it?

From daily commuters to occasional road trippers, vehicle owners are waking up to a smarter alternative to flat-rate insurance models. Enter Usage-Based Insurance (UBI) — a data-driven model where how, when, and how much you drive directly impacts what you pay. According to Stratview Research, the Usage-Based Insurance (UBI) market size was valued at US$ 43.38 billion in 2023 and is projected to grow at a robust CAGR of 7.2% during the forecast period to reach US$ 70.46 billion by 2030.

As electric vehicles (EVs) and internal combustion engine (ICE) cars coexist in a rapidly evolving mobility landscape, UBI is emerging as a game-changer — not just in pricing, but in driver behavior, risk assessment, and customer engagement.

The Problem: One-Size-Fits-All Doesn’t Fit Anyone

Traditional auto insurance models are built on assumptions — not actual behavior. They rely heavily on:

• Age, zip code, and credit history
• Vehicle model and accident history
• Broad usage categories (daily, occasional, etc.)

This approach fails to capture real-time risk and often penalizes safe, low-mileage drivers while rewarding high-risk behavior unintentionally.

According to Stratview Research, insurers lose billions annually due to poor risk segmentation, overpriced policies, and customer churn from dissatisfaction.

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The Agitation: New Vehicles, New Risks

Today’s vehicles — especially EVs — are equipped with telematics, sensors, and connectivity features that can track everything from acceleration to battery drain. But most insurers still underutilize this data.

For EVs in particular, key risk factors differ:

• Charging patterns and battery wear impact long-term usage
• Lower maintenance needs but higher repair costs post-accident
• Different driving ranges and regenerative braking behavior

Without UBI, insurers lack the tools to fairly price policies for EVs, often lumping them into outdated ICE-based pricing models.

The Solution: Insurance That Rewards Smarter Driving

Stratview Research anticipates robust growth in the Usage-Based Insurance Market, across both ICE and electric vehicles, as consumers demand personalization and cost efficiency.

UBI models typically fall into three categories:

1. Pay-As-You-Drive (PAYD) – Based on total mileage
2. Pay-How-You-Drive (PHYD) – Incorporates driving habits (speeding, braking, cornering, etc.)
3. Manage-How-You-Drive (MHYD) – Adds feedback loops, gamification, and rewards for safer behavior

For insurers, UBI unlocks:

• Improved risk assessment and underwriting accuracy
• Lower claims from safer driving behavior
• Stronger retention through transparent pricing
• New revenue streams via EV-specific service bundles and mobility subscriptions

Market Dynamics: Growth Across Regions and Vehicle Types

According to Stratview Research:

• North America and Europe lead in UBI adoption, with strong regulatory support and connected vehicle penetration
• Asia-Pacific is rapidly catching up, especially in urban centers where telematics is bundled with new EV purchases
• UBI is now being extended to fleet vehicles, ride-sharing platforms, and even micromobility services

Key players in the UBI ecosystem include:

• Progressive
• Allianz
• State Farm
• AXA
• InsurTech startups like Metromile and Root Insurance
• OEM-backed insurance units from Tesla, Ford, and Hyundai

Strategic Takeaway: In a Connected Car World, Static Insurance Models Will Stall

Usage-based insurance is not just a product—it’s an experience. It empowers drivers, enhances transparency, and aligns risk with reality.

Auto insurers, OEMs, and tech partners must now:

• Integrate real-time telematics and AI-driven analytics
• Develop differentiated pricing strategies for ICE vs. EV customers
• Ensure data privacy and regulatory compliance in UBI rollouts
• Educate customers to build trust and adoption.