By: Luke Jones, Published on June 23, 2016 11:00 AM, Last Update on June 27, 2016 12:03 PM
The Canadian auto insurance market will spur a growth in telematics based insurance policies in North American over the next five years. Along with already widening usage based insurance (UBI) policies in the United States, telematics will grow at a compound annual growth rate (CAGR) of 45.8% says analyst firm Berg Insight.
Substantial growth will see the telematics market in North America grow from 6.3 million policies in the fourth quarter of 2015 to 42.1 million policies in 2020.
The majority of the 6.3 million existing North American telematics policies are in the US, the Canadian market has been slow to adopt the coverage. UBI is seen as a way to aid the auto insurance industry as it approaches potential problems caused by autonomous vehicles and the sharing market. Canadian companies have acknowledged they are behind in terms of using telematics and aim to increase coverage options in the coming years.
Doing so will spur growth in UBI coverage through the coming years, says Berg Insight, a Swedish-based company.
Europe is already an established UBI market, especially in the United Kingdom and Italy where the policy type has been widely adopted and successful. Across the Old Continent the current 5.3 million policies through Q4 2015 will increase to 25.8 million in 2020, a 37.2% increase.
Canada has been slow to adopt telematics, but the country is adapting quickly and there are thought to be 450,000 policies in the country by the close of 2015.
“Canada, the U.S. and Italy, in particular, have seen a significant increase in the use of telematics-based auto insurance during 2015,” said Jonas Wennermark, IoT/M2M analyst at Berg Insight, in the press release.
According to the report, titled Insurance Telematics in Europe and North America, “the addressable market for insurance telematics is significant.”
“The nascent insurance telematics market is currently in a phase of strong growth which is expected to accelerate in the coming years,” the report said. “Europe and North America so far represent the vast majority of all insurance telematics programmes and active policies from an international perspective, and the front-running national markets include the U.S., Italy and the U.K.”