[2025 Edition] The Guide to Connected Insurance

During an investor call in 2023, Progressive CEO Tricia Griffith emphasized the significant impact of investments made to integrate driving data into the core of the company's business model: "Today, usage-based insurance (UBI) is our most predictive rating variable and it provides unparalleled rate accuracy to our customers". Connected data has indeed a real transformative potential for insurers.

Progressive is a perfect example of this success story. With a combined ratio 20 points better than the market over the past two years, the results of its auto branch are impressive. 

Boosted by these results, insurers are expanding the reach of driving data beyond the initial target. Last year, both Progressive and Allstate made crash detection available to all auto policyholders, not just those with connected policies.

For Matteo Carbone, Director of the IoT Insurance Observatory and an insurance expert, this is a winning transformation strategy. Insurers should be considering driving data as a strategic capability. This requires aligning teams, changing the way they work, and therefore building skills incrementally across the organization. Insurance companies that have already launched connected programs are in the process of acquiring data expertise that will be hard to match.

As a telematics service provider that has launched more than 60 connected programs worldwide, our position in the connected insurance ecosystem combined with our technical expertise is unique. We have designed this updated edition of The Guide to Connected Insurance to provide insurance executives and operation teams with a complete overview of the connected insurance ecosystem, in order to encourage them to initiate or accelerate the adoption of driving data within their organisation in 2025.

What is connected insurance?

Connected insurance is an approach to insurance based on the use of data generated by digital technologies and connected objects (Internet of Things or more commonly IoT). It is a set of products and services that impacts all areas of motor insurance: underwriting, pricing, claims management and prevention.

The connected insurance market in 2025

The map below shows the disparities in the connected insurance market by continent: 

• North America has 19 million connected policies, according to data shared by Matteo Carbone in an interview with Insurance Thought Leadership. This represents around 50% of the global market share.

• In Europe, the market is heterogeneous. According to Berg Insight's Insurance Telematics in Europe and North America report, the Italian market accounts for 10 million connected insurance policies, followed by the UK market with 1.3 million connected policies. The German market totals 1 million connected policies.

• In Africa, South Africa has around 300,000 connected policies, according to Ptolemus. It's the largest market on the continent.

• In Latin America, Ptolemus points out that the two most important markets for connected insurance are Mexico and Brazil.

• In the Pacific and Asia, Ptolemus estimates the market at 2.5 million connected contracts. South Korea has around 1.5 million connected policies and Japan around 700,000. Meanwhile, Remark, a subsidiary of SCOR, reports in its Global Consumer Survey 2023 that telematics penetration rates in China and Singapore are 66% and 59% respectively. However, it is difficult to have a precise idea of the number of connected policies in these countries.

The latest estimates from Berg Insight put the number of combined connected policies in the USA and Europe at least at 30.4 million. Asia, Africa and South America together account for 3.5 million policies, based on Ptolemus estimates. The global market for connected insurance is therefore estimated to be between 35 and 40 million policies. 

What telematics solutions are available to launch a connected program?

Between 1998 and 2016, telematics solutions were purely hardware-based. It wasn't until the second half of the 2010s that software alternatives emerged.

Connected boxes

There are two types of boxes: OBD-II dongles and black boxes. 

• OBD-II dongles plug into the vehicle's OBD port, and collect data on engine performance and fuel consumption.

• Black boxes are a more advanced data collection solution, but require professional installation.

While still dominant in fleet insurance, the market share of connected boxes in personal auto insurance is declining. This is due to certain inherent limitations:

• Establishing and managing a complex supply chain, and cumbersome logistics to get the connected device to the policyholder.

• As a hardware solution, connected boxes are not cost-competitive, making them prohibitively expensive for large-scale connected programs.

• Black boxes require professional installation, adding friction to the customer experience.

Smartphone telematics

This software solution uses smartphone sensors (accelerometer, gyroscope, inertial unit, GPS) to collect driving data and analyse driving behavior. 

The rise of smartphone telematics began in the United States in the mid-2010s:

This software-as-a-service (SaaS) solution offers many advantages: 

• As a software solution, smartphone telematics is universal. All policyholders, regardless of the make or model of their vehicle and phone, can be connected simply by downloading a telematics application.

• As the number of connected policyholders grows, the cost of the solution becomes more profitable: the more users, the lower the cost per user.

• It's the only telematics solution that can detect and measure phone distraction while driving, a critical factor in road safety.

• Data collection is transparent as the policyholder must grant specific permissions for the application to work on the phone. This means that the policyholder knows exactly what type of data is being collected, and explicitly consents to it. In addition, most telematics apps offer advanced privacy options, including the ability for drivers to define time slots during which the automatic start mode is disabled.

• The data collected by smartphone sensors is rich enough to allow all policyholders, regardless of the age or make of their vehicle, to benefit from connected mobility services such as accident detection.

Connected vehicles

Some manufacturers, including Tesla, Toyota and Stellantis, have launched connected programs based on data collected by their vehicles.

Connected vehicles data is rich. It provides key telematics data with unrivalled accuracy, such as mileage, vehicle location, harsh acceleration, hard braking, etc. 

However, accessing the data is complex for insurers:

• Each car manufacturer uses a proprietary system to manage driving data. In the absence of a standard framework, insurers wishing to use connected vehicle data must purchase it from car manufacturers or third-party aggregators. In both cases, the cost is significant and undermines the profitability of a large-scale connected program.

• Statista estimates the number of connected vehicles in circulation at 400 million, or around 30% of the global fleet. This means that insurance programs based on connected vehicle data can only target a narrow segment of drivers. 

• Despite the wealth of data from connected vehicles, this telematics solution cannot detect distracted driving, unless a camera is installed to film the interior of the vehicle.

Eventually, even if a standard framework for collecting and exchanging data from connected vehicles is established, making it easier and less costly for insurers to access data, the minority share of connected vehicles in the global fleet and the increasing age of the fleet will inevitably mean that multiple telematics solutions will coexist in the long term. 

Focus on Pay-As-You-Drive programs

Historically, a car insurance premium has been based on declarative criteria including age, gender, claims history, annual mileage, marital status, place of residence and parking, private and/or business use of the vehicle, number of drivers, and credit score in some countries. All this information is processed to define a driver's risk profile based on actuarial models.

The model promoted by Pay-As-You-Drive

Pay-As-You-Drive insurance premiums are based on indicators linked to the actual use of the vehicle, rather than traditional criteria.

Mileage is the main indicator because risk models show it to be a key factor in road risk: the higher the mileage, the higher the road risk. 

Some Pay-As-You-Drive programs use other indicators linked to vehicle use, such as actual driving time, to personalise the premium.

Pricing and target

The pricing model for Pay-As-You-Drive insurance programs can take two different forms:

• A fixed premium based on the annual mileage of the vehicle. (Example: a 250-euro premium for driving up to 5,000 km per year, a 300-euro premium for driving up to 6,000 km per year, etc.).

• A variable monthly premium based on mileage. In this case, the premium is made up of a fixed daily rate combined with a rate per kilometre driven (example: daily rate of 0.75 ct euro then 0.15 ct per kilometer driven).

Pay-As-You-Drive insurance products are aimed at short-distance drivers or second car owners, as their low mileage limits their exposure to road risk.

Focus on Pay-How-You-Drive programs

The Pay-How-You-Drive model

Behavior-based insurance, also known as Pay-How-You-Drive, is an insurance program where the premium is based on the driving style. While Pay-As-You-Drive programs use only mileage to personalise the premium, Pay-How-You-Drive programs add a variable linked to driving behavior to the mileage.

For Pay-How-You-Drive programs, telematics solutions collect the following indicators:

• Hash acceleration,

• Hard braking,

• Adherence or cornering,

• Speed,

• Mileage,

• Phone distraction (only smartphone telematics can be used to measure this indicator).

Behavioral data is enriched with contextual data to provide a complete understanding of the insured's driving habits:

• Daytime driving,

• Nighttime driving,

• Weather conditions,

• Road conditions.

Once collected, the data is processed by an analytics platform that assigns a safety score to each trip made. Policyholders can check their safety score via the mobile application. The higher the safety score, the safer the driving style, the lower the premium.

Pricing and targets

There are two pricing models for behavior-based insurance programs:

• Try before you buy (with fixed premium): driving behavior is analysed over a period of two weeks to one month. At the end of the trial, a personalised rate based on the driving style is set for the duration of the contract. The premium is updated at renewal, based on the evolution of the driving style.

• Personalised premium: the insurance premium varies according to the driving behavior observed over a contractually defined period (monthly, bimonthly, quarterly, etc.).

Some insurers impose a penalty on drivers whose safety score is deemed too low. According to Progressive’s website, around 2 in 10 drivers are penalised for dangerous driving.

There is no specific target for Pay-How-You-Drive programs. They are aimed at all drivers.

Connected services

Connected insurance also promotes new mobility services.

Crash detection

Connected boxes, smartphones and connected vehicles can leverage sensors data to detect collisions. When the telematics solution detects a potential impact, the data is sent to an analytics platform to confirm that it is indeed an accident. If confirmed, an alert is automatically sent to the insurer with the crash data (date, location, speed before and after impact, G-force). With this information in hand, assistance operators can quickly assess the situation and make the right decision (whether to send emergency services or a tow truck) within a few minutes.

The accident data can also be used to fill automatically a First-Notification-Of-Loss (FNOL), and/or to confirm the conditions under which the impact occurred. 

Coaching & eco-driving

For Pay-How-You-Drive policyholders, personalised driving tips are shared through the app to help them identify areas for improvement. For example, if the telematics solution detects a high rate of hard brakings, the coaching tips will focus on anticipating braking and safe distances.

Driving tips also incorporate an environmental perspective, as there is a correlation between sustainable driving and safe driving. The safest drivers on the road are those with the most sustainable driving style. Driving tips therefore promote eco-driving habits to reach a higher safety score.

Moreover, connected insurance programs reward drivers who drive below average, because the less they drive, the lower their exposure to road risk, and the lower their premium. While the initial motivation for policyholders is economic, one of the many positive side-effects of behavior-based insurance programs and usage-based insurance programs is to reduce CO2 emissions and to encourage the adoption of alternative modes of transport. 

Anti-theft function

Telematics solutions can also be used for vehicle recovery. Some insurers are actively promoting this service. In 2020 a, Phil Ost, Head of Personal Lines at Zurich Insurance highlighted: "If you’ve got a telematics box, or an app, or data to show you where the [stolen] car is, then it helps you to locate it. We had a policyholder who had his car stolen at work, he gave us a call, we managed to trace the vehicle, and then the police took over and recovered it. The amusing thing was, when we saw the data out of the box…and the journey from when the car was stolen by the thief to when the thief parked it at their home scored a perfect 10. That's pretty unusual. Our policyholders drive pretty well, but a perfect 10 is incredible. Even thieves can drive impeccably as well." 

In certain markets, such as Italy (131,679 vehicles stolen in 2023 according to Lojack) and South Africa (around 36,000 vehicles stolen in 2023 according to police statistics), the anti-theft feature is one of the main drivers of telematics growth. The service allows the authorities to locate and recover a stolen vehicle at limited costs to the insurer. This service is being adopted in an increasing number of countries, such as France with initiatives like Roole.

Road Safety

While insurers' prevention actions have traditionally taken the form of awareness-raising workshops or campaigns against drink-driving and non-use of seat-belt, some insurers are innovating by launching prevention programs based on driving data.

In France, GMF has launched the DrivMeUp' program. This prevention program is open to all GMF policyholders. Participants download a telematics application that analyses their driving behavior, and offers personalised driving tips. Regular driving challenges are organised to encourage drivers to adopt a safer driving style, and prevent dangerous behaviors such as phone distraction. GMF rewards drivers who make the most progress.

In Denmark, insurer LB Forsikring has launched the Bilist program. The Bilist+ application analyses the driving behavior of LB Forsikring’s policyholders. Drivers who demonstrate safe driving behavior receive a reduction in their deductible in the event of an accident.

Insurers who use driving data for prevention purposes see positive results:

• Telematics-based prevention programs reach a wider audience than traditional workshops which are limited to participants.

• Financial investment is kept under control, as there is no need to hire driving instructors or staff to run the workshops.

• Participants have a lower claims ratio than non-participants: 

  • Loïc Kueny, Direct Assurance’s Marketing Director, explains to France Innovation media: "This device [YouDrive connected program] is also virtuous, as we can see a significant reduction in claims (-20%) between those who have this box - and those who don't". 

  • Tokio Marine also shares statistics on the lower claims rate of telematics program participants: 

• The satisfaction and retention rates of participants are higher than those of non-participants. Kelly Hernandez, VP Personal Lines Telematics at NationWide, tells Carrier Management: "For those that have participated in a telematics program, Nationwide consistently sees statistically significant improvement in overall satisfaction and the likelihood to recommend Nationwide. This is seen in customer retention, as well, which is typically two to three points higher than those that do not try telematics." 

• Participants significantly reduce risky driving behaviors. According to a report by AllState, connected drivers use their phone 44% less than other drivers, they spend 23% less time on the road at high speeds, and have an 11% lower rate of hard braking.

• Connected insurance enables insurers to create new touch points with customers, and generate non-commercial exchanges. For example, according to data shared by AllState: 

  • 80% of connected policyholders activate app notifications,

  • Connected policyholders have a 3 times higher rate of application engagement than non-connected policyholders, and report a higher customer satisfaction rate.

Conclusion

You now have an overview of the connected insurance market. As this guide shows, based on the results and testimonials of insurers who have launched connected programs, leveraging connected data is indeed a competitive advantage. Connected programs benefit both the insurer and the insured. It also renews and digitizes the dialogue between the two stakeholders. 

However, the lack of large-scale connected programs in some markets, including France, is a sign of reluctance that needs to be addressed. The reasons are both technical - only on-board telematics are relevant - and ethical - customers are afraid of being tracked.

However, both of these concerns have no basis in reality. As explained above, it will be several decades before the global fleet is natively connected. And insurers that use connected data, and are already outperforming the rest of the market, will have gained unrivaled expertise. As for the fear of alienating customers by asking them to share their driving data, studies on the subject (here and there) and feedback from insurers that have launched large-scale connected programs converge: the majority of policyholders are willing to share their driving data if they receive a value-added service in return, such as accident detection. 

Insurers need to capitalize on the feedback from Progressive, AllState, Discovery, Altima Assurance, YouDrive, and LB Forsikring, to name a few, and get started. If you'd like to explore this further, we'd be happy to help.