Usage-based insurance (UBI) continues to attract funding despite the fall in insurtech investment due to COVID-19, according to data and analytics company GlobalData.
A recent survey by GlobalData found that 9.7% of drivers in the UK currently have a UBI policy, but analysts expect this figure to increase as a result of the pandemic.
UBI operates on a model whereby policyholders’ premiums are calculated depending on the utilisation of the insured asset.
Due to social distancing and the government-mandated lockdown, car owners have been driving much less, which has focused more attention on the advantages of these products.
“Given that mileage is a key factor when calculating motor premiums there have been calls for premium refunds, yet only a handful of insurers have offered any,” said Yasha Kuruvilla, Insurance Analyst at GlobalData. “As a result, UBI policies will become more popular because of COVID-19.”
GlobalData also found that UBI policies are currently much more popular among younger drivers as 22.3% of drivers between the ages of 25 and 29 purchased a UBI policy in 2019, while at the other end of the spectrum uptake was just 2.2% among those aged 50–54.
Moreover, younger people are more likely to be adversely affected by the COVID-19 pandemic due to a lack of savings and the large representation of this demographic in the hospitality sector.
Despite overall insurtech funding dropping 54% in Q1, this kind of insurance is seeing continued investment, with UBI provier By Miles recently securing £15 million in funding.
The company claims to have had its strongest week ever in April 2020, highlighting interest in UBI propositions even during a period of financial hardship.
Meanwhile, pay-per-mile motor insurer Just Auto Insurance launched in the US during the COVID-19 pandemic.
“With interest in UBI policies remaining high despite economic downturn, more policies of this nature will continue to be developed,” Kuruvilla added. “While these policies are mostly focused on motor insurance, more lines of business will begin to experiment with the model as well.”