The UBI (Usage-Based Insurance) market faces several challenges as it continues to evolve and gain adoption. Here are some of the critical challenges faced in the UBI market:

Standardization and Regulation: The UBI market lacks standardized approaches and metrics for data collection, analysis, and premium determination. This lack of standardization can make it challenging for insurance companies to compare and evaluate data from different sources. Additionally, regulatory frameworks need to keep pace with the evolving UBI market to address privacy, fairness, and transparency concerns.

Transparency and Explainability: UBI models often utilize complex algorithms and machine learning techniques to analyze driving behavior and determine premiums. Ensuring transparency and explainability of these models can be challenging. Policyholders should be able to understand how their premiums are calculated based on the collected data, which may require insurers to provide clear explanations and accessible information.

Source URL: - https://www.simplesolve.com/blog/auto-insurers-it-platform-readiness-for-usage-based-insurance