Metromile: Pay As You Go Auto Insurance
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In a previous article, we talked about a startup company called Automatic Labs which allows you to turn your old car into a smart car with the introduction of a simple device that plugs into the OBD-II port of your vehicle. Automatic Labs isn’t the only player in this space, and we recently came across another startup that not only wants to “make every car a smart car” but also offers “pay as you go” auto insurance.
About Metromile
Founded in 2011, San Francisco based Metromile has taken in $14 million in funding so far to develop a service that enables you to pay an auto insurance premium that takes into account the number of miles you drive. 70% of people drive under 10,000 miles a year, and many of these individuals help subsidize people who drive much more. Metromile has developed two devices that are looking to disrupt the $180 billion U.S. auto insurance industry:
Update 07/26/2018: Since we first wrote about Metromile, the money has poured in with close to $300 million in total funding raised to-date. The most recent round, a $90 million Series E, closed just days ago, and was led by Intact Insurance, the largest provider of property and casualty insurance in Canada.
The Metromile Pulse plugs into the OBD-II port of your vehicle and collects data about trips and your vehicle health similar to the Automatic Labs plugin. The Pulse is provided free-of-charge for subscribers to the Metromile “pay as you go” auto insurance offering which can save infrequent drivers significant money. For example, Metromile claims that if you’re driving under 5,000 miles per year, you could save 40% to 50% on your car insurance. A company called National General Holdings Corp (NASDAQ:NGHC) provides all the underwriting for Metromile’s auto insurance policies. When you cancel your policy, you can keep the device for a $100 charge.
The Metromile Tag is a device that is enabled by a technology developed by Apple called iBeacon. The device is simply placed in your glovebox and helps track your car’s location via Bluetooth. In a genius marketing move, the device is offered for free with some great functionality that also lets you know how much money you could save by subscribing to the Metromile auto insurance offering.
The Metromile Pulse seems to provide the same functionality as the Automatic Labs device, and also proactively addresses concerns that current Automatic Labs users might have with the following statement:
Per-mile insurance doesn’t consider other driving factors such as how fast you drive, how suddenly you turn, or how hard you brake, just how many miles you drive.
If you recall from our previous article, the Automatic Labs device measures data such as whether or not you exceed a certain speed, or how many times you “hard brake” or accelerate quickly. We wouldn’t necessarily want to know that our driving habits are being scrutinized that closely by our insurance company.
Customers that use the Metromile insurance offering actually drive 6% less and save on average $500 a year according to the Company. Per-mile insurance is currently available in California, Illinois, New Jersey, Oregon, Pennsylvania, Virginia, and Washington, but they’re rapidly expanding to other states. One interesting feature offered by Metromile is a “street sweeping alert”. Apparently, in some U.S. cities you’re supposed to move your car when the street is due to be swept otherwise you get a ticket. Metromile has already issued more than 28,000 alerts in San Francisco and Chicago and saved customers an average of $1.8 million in parking tickets.
Conclusion
It’s interesting to examine the competitive position of Automatic Labs and Metromile. Automatic Labs has a business model that promotes other companies to pay them royalties to access the data coming from their device. They would probably be much happier if Metromile used their device to collect the data needed for their auto insurance offering. In this case, Metromile probably wants complete control over the data received from your car’s OBD-II port so they offer their own device. These two companies could make for an interesting merger given that their devices are so similar and synergies could certainly be realized.
For exposure to this space, retail investors can only hope for an eventual IPO from either of these companies, and it would be even better if investors could buy pre-IPO shares before they begin trading.
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