Global Usage-Based Insurance Market Set for Robust Growth to $122B by 2034

The global usage-based insurance (UBI) market is projected to experience significant growth, expanding from USD 33.47 billion in 2025 to USD 122.33 billion by 2034, at a compound annual growth rate (CAGR) of 15.9%. This growth is driven by increasing adoption of vehicle telematics, real-time driving behavior analytics, and personalized premium models that enable insurers to improve risk assessment accuracy and tailor pricing to individual driving patterns. UBI encompasses various telematics-based insurance models, including Pay-As-You-Drive (PAYD), Pay-How-You-Drive (PHYD), and Pay-As-You-Go (PAYG), supported by technologies such as OBD-II devices, embedded telematics systems, smartphone applications, and hybrid data solutions. These approaches are applied across passenger cars, light commercial vehicles, and heavy commercial vehicles, with applications in personal vehicle insurance, commercial fleet management, shared mobility platforms, and OEM-integrated insurance products. The insurance sector is transitioning from static, broad-based premium calculations to dynamic, behavior-driven models empowered by telematics, IoT, and AI analytics, which continuously monitor driving patterns in real time. This shift enables safer drivers to benefit from reduced premiums and encourages safer driving habits through feedback mechanisms and gamification integrated within insurer platforms. Strategic collaborations between insurers and vehicle manufacturers to embed telematics hardware into vehicles are enhancing data accuracy and user experience by eliminating the need for external devices, facilitating streamlined, data-driven insurance bundled with vehicle purchase. Regulatory developments globally support UBI growth, with mandates such as India’s AIS-140 standard for commercial fleet GPS tracking and emergency systems, Europe’s eCall initiative, and North America’s Vehicle Safety Data Act fostering connected vehicle infrastructure. These initiatives create a conducive environment for telematics adoption and behavior-based insurance models. However, the fragmented and inconsistent regulatory landscape concerning data governance and privacy across regions presents challenges, impacting cross-border scalability and uniform policy implementation. Europe’s stringent GDPR regulations contrast with emerging markets still formulating telematics data policies. Urbanization and evolving mobility trends, including car sharing and flexible vehicle ownership, are accelerating demand for short-term, usage-linked insurance products that align premiums closely with actual vehicle use. PAYD dominates market share due to consumer preference for mileage-based cost efficiency, while PAYG shows the fastest growth, reflecting the rise of on-demand and subscription-based auto insurance models targeting younger and fleet users. North America leads the UBI market with a 35.21% share in 2025, fueled by early connected vehicle ecosystem development, advanced insurance infrastructures, and consumer openness to personalized insurance. Partnerships integrating telematics at vehicle purchase points and the introduction of engagement platforms offering rewards enhance market penetration. Asia Pacific is forecasted to be the fastest-growing region, propelled by rapid digitalization, growing middle-class vehicle ownership, and smartphone-based UBI platforms. India stands out as a burgeoning market with innovative telematics integration in subscription and leasing models, alongside micro-insurance pilots targeting two-wheelers and small fleets, supported by app-driven consumer engagement. Europe’s steady UBI growth is underpinned by connected mobility infrastructure, regulatory frameworks, and consumer interest in fair pricing tied to driving behavior and environmental objectives. Germany exemplifies advanced UBI adoption through insurer-OEM partnerships embedding telematics in vehicles, supported by AI risk assessment and eco-driving incentives. In Latin America, rising middle-class consumers and commercial fleets drive expansion in telematics adoption and smartphone-based UBI products. Brazil is prominent with digital-first platforms enabling driving analytics and usage-based premium discounts, enhanced by loyalty programs and gamification features. The Middle East and Africa region exhibits consistent UBI market growth driven by increasing connected vehicle adoption and digital insurance initiatives, particularly in the UAE, Saudi Arabia, and South Africa. Saudi Arabia’s market reflects rapid digitalization, with insurer collaborations and mobile applications fostering policy accessibility and driver engagement. By market segment, PAYD holds the largest revenue share, favored for aligning insurance costs with actual mileage and supporting cost efficiency amid shifting urban transportation patterns. PAYG is the fastest-growing segment, propelled by demand for flexible, modular insurance suited to modern mobility usage. Among telematics technologies, OBD-II devices remain predominant for their ease and cost-effectiveness, while embedded telematics systems exhibit the fastest growth due to increasing OEM collaboration. Passenger cars constitute the largest insured vehicle category within UBI, with personalized behavior-based models driving uptake. Light commercial vehicles show significant growth influenced by expanding fleet and logistics sectors leveraging real-time telematics for insurance optimization. The individual vehicle insurance segment is growing steadily, driven by demand for transparent, usage-based policies that integrate digital engagement tools and incentivize safe driving. The UBI market remains fragmented, with leading insurers such as Progressive, State Farm, and Allstate enhancing market positions by deploying AI-driven risk analytics, dynamic pricing, and expanding telematics partnerships. Emerging market participants like India’s SBI General Insurance are innovating with flexible, mileage-based products targeting low-usage customers, enhancing accessibility and customization. Overall, the UBI market is poised for continued expansion supported by technological advancements, evolving consumer preferences, regulatory stimuli, and strategic insurer-automaker collaborations fostering innovation in personalized automotive insurance.