Connected Car Usage-Based Insurance (UBI) Market - Strategic Insights and Forecasts (2026-2031)

The Connected Car Usage-Based Insurance (UBI) Market will increase from USD 36.3 billion in 2026 to USD 54.8 billion in 2031, at a 8.6% CAGR.

The Connected Car Usage-Based Insurance (UBI) Market represents a fundamental structural transformation within the automotive insurance sector, transitioning from traditional, static risk assessment based on demographic profiles and historical claim data to dynamic, highly personalised pricing driven by real-time driving behaviour. UBI leverages telematics—a blend of telecommunications and informatics—to collect and analyse data points, including mileage, speed, hard braking events, and trip times, directly from a connected vehicle. The 'connected car' forms the essential data conduit, whether through factory-installed (embedded) systems or after-market devices (OBD-II, smartphone apps). The market is driven by a powerful value proposition: policyholders gain the opportunity for premium reduction and personalised feedback, while insurers benefit from superior risk selection, improved underwriting accuracy, fraud reduction, and enhanced policyholder engagement throughout the entire lifecycle, from acquisition to claims. This analysis dissects the factors that directly modulate demand for these data-centric insurance products.

Connected Car Usage-Based Insurance (UBI) Market Analysis

• Growth Drivers

The ubiquitous presence of Connected Vehicle Technologies, with over three-quarters of new vehicles equipped with OEM-installed telematics, simplifies the adoption process for insurers and eliminates the friction of physical device installation, directly driving higher customer enrolment in UBI programs. The consumer search for Personalised Premium Pricing is a critical demand catalyst, as safe drivers actively migrate to UBI policies to capture discounts of up to 30%, which is unavailable in traditional models. Furthermore, the capacity of telematics to enable Faster, More Accurate Claims Processing (reducing settlement time by up to 50% according to some reports) directly increases the perceived value of UBI to policyholders, boosting demand for programs that incorporate accident assistance features. This transparency and efficiency in claims enhances overall customer trust and willingness to share data.

• Challenges and Opportunities

The primary challenge constraining market growth is persistent Consumer Data Privacy Skepticism. Many prospective policyholders are hesitant to provide continuous access to detailed geolocation and driving behaviour data, creating a psychological barrier to enrollment. Regulatory fragmentation across US states and global jurisdictions regarding telematics data usage and storage also presents an operational complexity and cost burden for global insurers. A major opportunity lies in the shift toward Manage-How-You-Drive (MHYD) programs, which move beyond pricing to offer real-time driver coaching and preventative safety features, increasing demand from employers and fleet managers seeking measurable accident rate reduction. Additionally, the proliferation of Electric Vehicles (EVs), which carry higher repair costs and unique battery-related risks, creates an opportunity for UBI to provide more granular, risk-appropriate pricing for this high-value, fast-growing segment.

• Supply Chain Analysis

The UBI market is a services and software-centric ecosystem, but its supply chain is defined by the hardware and data logistics required to execute the service. The critical components are Telematics Service Providers (TSPs) like Octo Telematics and Cambridge Mobile Telematics, which develop the proprietary algorithms, software platforms, and data processing capabilities. The supply chain relies on the consistent, high-quality production of Smartphone-based Telematics software (developed in-house or by TSPs) and physical OBD-II Devices (manufactured primarily in Asian electronics hubs). A crucial dependency exists on the Automotive OEM layer, which controls the quality and accessibility of Embedded Telematics data via partnerships and secure Application Programming Interfaces (APIs). The logistical complexity centres on secure data aggregation and instantaneous processing (low-latency data transmission) required for real-time risk scoring, rather than physical freight. The US-EU Data Privacy Framework (DPF) is a core logistical dependency, ensuring compliant cross-border data transfer between European insurers and US-based TSPs.

• Government Regulations

Automotive Predictive Diagnostic Market Segment Analysis

• By Technology: Embedded Telematics

The Embedded Telematics segment represents the future baseline for UBI data collection and is rapidly becoming the dominant technology, fundamentally transforming policyholder demand. This technology utilises the vehicle's factory-installed systems (OEM-embedded modules and sensors), providing a high-quality, high-fidelity, and tamper-proof data stream directly from the vehicle’s CAN bus. This data precision, covering advanced metrics like ADAS engagement and vehicle health, directly increases insurer demand for this platform as it enables far superior risk modelling compared to less precise smartphone-based or basic OBD-II devices. For the individual policyholder, this option removes the physical or application-based barrier to entry entirely, leading to higher enrollment rates, as participation becomes a seamless, invisible software activation with the vehicle manufacturer's consent, driving significant demand velocity.

• By End User: Fleet Operators

The Fleet Operators segment exhibits distinct, commercially motivated demand drivers for Connected Car UBI. For these end-users, UBI is not merely about premium reduction (Pay-As-You-Drive) but is a critical Risk and Asset Management tool (Manage-How-You-Drive). Demand is driven by the imperative to reduce operational expenses: aggressive driving behaviour directly correlates with higher fuel consumption, increased maintenance costs, and, critically, higher accident frequency. UBI programs provide fleet managers with verifiable, actionable safety scores and real-time alerts, which enable proactive coaching and adherence to corporate safety standards. This functionality directly increases demand for UBI as a risk mitigation service rather than just an insurance product, with specific demand concentrated on solutions provided by established telematics specialists like Verizon Connect and Octo Telematics.

Automotive Predictive Diagnostic Market Geographical Analysis

• US Market Analysis (North America)

The US market is the world’s most mature UBI market, characterised by high penetration rates and strong competitive differentiation among major insurers. Demand is primarily driven by the consumer's pursuit of premium discounts, with Pay-How-You-Drive (PHYD) models leading adoption. The proliferation of affordable Smartphone-based Telematics solutions, leveraging high mobile connectivity, has lowered deployment costs and accelerated mass-market demand, particularly for large-scale insurers like State Farm and Progressive. However, the patchwork of state-level regulatory approvals for UBI pricing models introduces complexity, meaning insurers must navigate varying rules on data usage and rating factors before they can universally launch products, segmenting and localising demand.

• Brazil Market Analysis (South America)

Brazil represents the largest UBI market in South America, where demand is fueled by the critical need to address high vehicle theft and insurance fraud rates. UBI, particularly services leveraging Black-box Devices and GPS tracking, directly appeals to both insurers and policyholders by offering verifiable location and theft recovery services that are often bundled with the insurance policy. While price sensitivity is high, the value of proven anti-theft functionality overrides privacy concerns for many consumers. Market growth requires partnerships with local mobile network operators to ensure reliable data transmission across the country’s varied geographical and infrastructural landscape.

• UK Market Analysis (Europe)

The UK pioneered the UBI market, initially targeting high-risk segments like young drivers, where UBI offered a pathway to affordable coverage. Today, the market is highly segmented. Demand is now broadly driven by the mandatory compliance with rigorous data protection laws like GDPR, which have led to a concentration of sophisticated, transparent UBI offerings from established providers like The Floow and major insurers. The presence of numerous specialist TSPs creates a competitive advantage for insurers who can offer highly customised and privacy-compliant UBI products, directly increasing demand for advanced, transparent PHYD programs over simpler PAYD models.

• South Africa Market Analysis (Middle East & Africa)

The South African market is a key regional hub for UBI, where the demand imperative is overwhelmingly centred on Risk Mitigation and Security. The prevalence of vehicle theft, hijacking, and poor road conditions drives policyholder demand for UBI solutions that incorporate Stolen Vehicle Recovery (SVR) services, often provided via covert Black-box Devices. Insurers actively promote UBI not only for risk pricing but also for its demonstrable ability to reduce claims frequency via immediate accident alerts and real-time driver feedback, which directly increases demand for integrated security and insurance products.

• Japan Market Analysis (Asia-Pacific)

The Japanese market is characterised by a high degree of technological integration and a societal preference for detailed, data-driven services. Demand for UBI is propelled by a focus on Elderly Driving Safety and overall accident reduction, with UBI acting as a tool to monitor and provide feedback to older drivers. The market favours Embedded Telematics due to the high penetration of connected cars from domestic OEMs and a general willingness to adopt technology that is perceived as safe and reliable. Demand is specifically high for Manage-How-You-Drive (MHYD) programs that prioritize personalized safety coaching and accident prevention over simple mileage tracking.

Automotive Predictive Diagnostic Market Competitive Environment and Analysis

The Connected Car UBI market is a critical intersection of traditional insurance underwriters and advanced technology specialists, creating a dynamic, competitive landscape where data analytics capabilities are the key differentiator.

• State Farm

State Farm, a leading US insurer, leverages its vast policyholder base to drive adoption of its UBI program, Drive Safe & Save. State Farm strategically utilises a blended technology approach, primarily relying on a Smartphone-based Telematics application paired with a proprietary Bluetooth beacon to accurately identify the vehicle and record driving data. This model lowers hardware costs and friction for the individual policyholder, making participation accessible and thus increasing the volume of enrollment demand. The program focuses on standard UBI metrics (mileage, acceleration, braking) to calculate the premium discount, offering a simple, clear value proposition of up to 30% savings upon renewal. The verifiable details are in the app's use of the Bluetooth beacon for trip detection and the feedback system on driving behaviour.

• AXA

AXA, a major global insurance group, positions its UBI strategy around connected car partnerships and next-generation risk modelling. AXA's approach is to embed itself in the automotive value chain, recognising the future dominance of OEM-provided data. The company focuses on developing sophisticated pricing models that can adapt to data generated by Embedded Telematics and future autonomous systems, as evidenced by their research into insuring the cyber risks of connected vehicles. This strategy aims to capture the high-value segment of new, connected vehicles. AXA's verifiable programs often emphasise accident reconstruction and First Notice of Loss (FNOL) features enabled by telematics, which directly drives demand from consumers valuing efficiency and rapid support during an accident event.

• Octo Telematics

Octo Telematics is a global leader and specialised Telematics Service Provider (TSP), positioning itself as the critical technology and data intelligence backbone for insurance carriers. Octo operates on a B2B model, providing the hardware (OBD-II and Black-box Devices), software platforms, and proprietary risk scoring algorithms that allow insurers (like AXA and other major global underwriters) to launch UBI programs rapidly. Their verifiable value proposition focuses on data accuracy, security, and proven claims reduction capabilities. Octo’s extensive experience in data management for high-volume UBI programs directly increases demand from insurers looking for an outsourced, proven solution to enter or expand in the data-intensive UBI market without building proprietary technology.

Automotive Predictive Diagnostic Market Developments

Recent market developments focus on strategic expansion into high-growth segments and product enhancements to improve data fidelity and customer utility.

• March 2024: State Farm Launches Drive Safe & Save Business App.

State Farm introduced the Drive Safe & Save Business app, an extension of its core UBI offering specifically targeting business auto customers. This verifiable product launch allows business owners and fleet operators to monitor their vehicles with near real-time location data and receive detailed trip maps and driving feedback, utilising a Bluetooth beacon paired with a smartphone. This capacity addition strategically expands State Farm's UBI footprint into the lucrative and safety-conscious Commercial Businesses/Fleet Operators segment.

Connected Car Usage-Based Insurance (UBI) Market Scope: