The Rise of Usage-Based Auto Insurance: Reviews and Analytics for 2025

Usage-Based Insurance (UBI) is rapidly transforming the auto insurance landscape in 2025 by leveraging telematics technology to price premiums based on actual driving behavior rather than traditional risk factors like age or location.

• The global automotive UBI market is estimated at about $69.8 billion in 2025 and is forecasted to grow at a compound annual growth rate (CAGR) of around 21–23% through 2032–2034, reaching values between $270 billion and nearly $600 billion by the early 2030s.

• North America leads the market with a 36.4% share in 2025, driven by widespread telematics adoption and insurer-OEM partnerships.

• The passenger vehicle segment dominates, holding roughly 68.5% of the market, as consumer demand grows for personalized discounts and value-added services like theft recovery and remote vehicle control.

• UBI programs use telematics devices or smartphone apps to monitor driving habits such as speed, mileage, braking patterns, and time of day.

• Premiums are adjusted based on these real-time data points, rewarding safe and low-mileage drivers with lower rates.

• Variants include Pay-As-You-Drive (PAYD), charging based on miles driven, and Pay-How-You-Drive (PHYD), which factors in driving behavior quality.

• About 17% of U.S. auto insurance shoppers were offered UBI programs in 2025, a slight increase from 15% in 2024 but down from 22% in 2023, indicating some market fluctuation.

• Approximately 14.4% of personal auto policies now include telematics, with 20.9% of global consumers having pay-as-you-go policies.

• UBI is especially popular among younger drivers, who face higher premiums and appreciate the opportunity to reduce costs through safer driving.

• Insurers like Progressive (Snapshot), Allstate (Drivewise+), State Farm, and Nationwide are key players expanding UBI offerings with advanced telematics and real-time premium adjustments.

•  Drivers who exhibit safe driving habits can save on average 3% or more on premiums, with some EV owners receiving up to 50% discounts for efficient driving.

•  UBI promotes reduced accident frequency by incentivizing cautious driving behavior.

•  Consumers gain insight into how their driving affects their insurance costs.

•  Pay-per-mile or pay-how-you-drive models offer more personalized and fair pricing.

• Some states are beginning to regulate telematics data use to protect consumer privacy and ensure fairness.

• Adoption barriers include consumer concerns about data privacy and the complexity of some programs.

• The market is evolving with smartphone-based telematics reducing implementation costs and increasing accessibility.

• J.D. Power’s 2025 U.S. Auto Insurance Study ranks Nationwide highest in customer satisfaction for UBI, with other top insurers including Progressive and State Farm.

• Consumers report high satisfaction with UBI programs due to cost savings and user-friendly digital tools.

Usage-Based Auto Insurance is growing rapidly in 2025, driven by telematics technology, consumer demand for personalized pricing, and insurer innovation. The market is expected to continue expanding at over 20% CAGR globally, with North America leading adoption. While UBI offers significant savings and promotes safer driving, regulatory and privacy concerns remain. Leading insurers like Progressive, Allstate, State Farm, and Nationwide are at the forefront of delivering these programs, which are increasingly popular among younger and cost-conscious drivers.