How Regional Insurers Can Take Advantage of UBI Car Insurance to Compete with Big Players

In the world of auto insurance, the rise of Usage-Based Insurance (UBI) has created a significant shift, giving insurers new ways to assess risk and price policies. National giants like Progressive and Allstate have been at the forefront, but there’s a quiet revolution happening beneath the surface. Regional insurance carriers are in a unique position to leverage UBI car insurance and tap into new customer segments, all while competing with larger players. Here’s why regional insurers should be paying closer attention to UBI, and how they can use it to their advantage.

The UBI Car Insurance Landscape: Not Just for National Giants

While the UBI car insurance market is experiencing rapid growth across North America, it’s often overshadowed by the big names in the industry. However, the rise of UBI isn’t just a trend for large insurance carriers — regional players are finding new opportunities to innovate and thrive. In fact, over 40% of policyholders in the United States are now opting for UBI policies, and this market is expected to grow from $43.38 billion in 2023 to $70.46 billion by 2030, at a compound annual growth rate (CAGR) of 7.2%.

This offers a huge potential for regional insurers to carve out their own niche, as the market is still highly fragmented. While national carriers have scale, smaller, regional insurers can take advantage of more agile business models and a deep understanding of local markets to compete. The biggest hurdle — cost and technology integration — is fading as smartphone-based telematics and cloud solutions continue to evolve.

Smartphone-Based UBI: A Game-Changer for Regional Insurers

One of the most exciting developments in UBI car insurance is the rapid growth of smartphone-based telematics. Unlike traditional hardware-based solutions, such as on-board diagnostics (OBD) dongles, smartphone-based solutions don’t require expensive hardware installation and are becoming much easier to implement. In fact, smartphone-based UBI is the fastest-growing segment in the auto insurance industry, especially among first-time policyholders.

According to recent data, 75% of passenger cars sold in 2024 will come with built-in cellular connectivity. This provides a unique opportunity for regional carriers to tap into a wealth of driving data without the need for costly infrastructure. Smartphones are now the primary platform for telematics, enabling insurers to track driving behavior such as speed, braking habits, and mileage, which ultimately allows for more accurate and personalized pricing.

For regional carriers, this means that UBI is no longer out of reach. All that’s required is a robust app, a solid data infrastructure, and a customer-centric mindset. With the potential to offer tailored pricing based on actual driving behavior, regional insurers can build stronger relationships with policyholders, particularly among tech-savvy, younger drivers.

Leveraging Local Knowledge for Competitive Advantage

Unlike large national players, regional insurance companies often have an intimate knowledge of their local markets. This gives them an edge in understanding specific driving patterns, weather conditions, and risk factors that may not be as apparent to big carriers. By using this local insight, regional carriers can offer more targeted UBI programs that resonate with their customer base.

For example, Ohio Mutual Insurance Group, a regional insurer, launched a smartphone-based UBI program specifically designed for young and rural drivers in the Midwest and Northeast. By analyzing local driving data, they were able to offer customized discounts based on actual driving behavior, rather than relying on generic risk assumptions. This localized approach resulted in increased customer engagement and improved retention — two key challenges for insurers trying to cater to younger, price-sensitive customers.

Similarly, a Pennsylvania-based insurer piloted a UBI program targeting suburban and rural drivers, using smartphone telematics to accurately assess risk and offer more competitive pricing. Their success shows how regional insurers can use UBI to offer tailored, value-driven solutions that larger, national carriers may struggle to deliver at the local level.

Regulatory Sandboxes: A Pathway for Innovation

While regulatory hurdles have often been cited as a challenge to UBI adoption, recent developments in certain states are making it easier for regional insurers to test new products and innovate without running into roadblocks. States like Ohio, Texas, and Pennsylvania have launched regulatory sandboxes or pilot programs that allow insurers to experiment with UBI offerings under relaxed compliance requirements.

These programs are often underutilized by smaller insurers, but they offer a critical pathway for regional carriers to test UBI solutions, fine-tune their pricing models, and gather valuable data before launching full-scale products. For example, Arizona and Kentucky have introduced insurance innovation sandboxes that allow UBI pilots to run under more flexible rules. By participating in these programs, regional carriers can quickly iterate and scale their offerings, gaining a competitive edge before larger national insurers have a chance to react.

The Future of UBI Car Insurance for Regional Insurers

The rise of smartphone-based telematics and regulatory innovations means that UBI car insurance is more accessible than ever for regional insurers. By tapping into local knowledge, leveraging new technology, and utilizing regulatory sandboxes, smaller carriers can effectively compete with larger players in the UBI space. The market may be dominated by big names now, but for regional insurers willing to innovate and adapt, there’s plenty of room for growth and success.

If you’re a regional insurer, now is the time to start exploring UBI options. With the right strategy and technology in place, you could be the next big player in the growing world of usage-based auto insurance.