Insurance innovation alert: What if you could pay an insurance rate based only on the actual miles you drive each year, as opposed to an estimate? Enter Metromile, a San Francisco-based startup on a mission to overhaul the car insurance industry. (Hm, sound vaguely familiar?)
While the startup has actually been around for three years, it’s just now getting some major press, including a piece in Bloomberg Businessweek by Noah Buhayar. Buhayar reached out to The Zebra, and he used our very own insurance search engine to compare the startup’s prices against those of more traditional insurance companies. According to Buhayar’s estimates from The Zebra’s data, his company can offer some relatively competitive pricing against the big boys.
Buhayar describes Metromile’s pitch this way in his piece: “It’s straightforward: Your insurance premium should be based on exactly how much you drive. The more miles you put on your car, the more you pay, because the odds are higher you’ll have a claim. Drive less, pay less.”
What Does Metromile Offer?
Currently, Metromile is available in four states: California, Illinois, Oregon, and Washington. All customers get a device called a Metronome, which tracks mileage by plugging into a car’s data port. Another interesting note is that Metromile acts as an agent, not a company—the policies are underwritten by National General Insurance Group.
In addition to insurance, though, Metromile also offers other pertinent data on your car via its iPhone app. The app, which was revamped earlier this summer, provides visualizations of trip statistics and trends, fuel consumption, vehicle diagnostics, and car location (never wander around a parking lot again!). Another great bonus? Drivers can contact on-staff Metromile mechanics with maintenance questions.
Responding to Trends
What’s most interesting about Metromile, perhaps, is its reason for existence: In a press release, Metromile explained that the company developed its pay-per-mile car insurance product by observing that traditional insurance pricing was remaining the same, despite a downward trend in US driving. This is a stat we actually hadn’t yet seen, from the U.S. Department of Transportation: “Travel on all roads and streets dropped roughly 3.1 billion miles in February 2013 compared to February 2012. By reinventing insurance to a variable pricing model based on miles driven, Metromile offers significant savings to people who drive less than 10,000 miles per year – the average customer saves nearly $500 annually.”
Metromile is also different than usage-based discount programs in that it doesn’t use driving behavior—for example, how hard you brake, what time of day you drive—to calculate your cost. The product is really aimed at urban drivers who don’t log many miles annually, but it will be interesting to watch, as the startup grows, to see who else might get excited about paying for insurance by the mile.
Think their game is a good idea? Is the company destined for huge success or poised to have a hard time competing with more traditional companies?