MetroMile Next To Embrace UBI, Offers “By-The-Mile” Approach

This week the auto insurance company MetroMile introduced a new model for usage-based auto insurance (UBI) in Washington State that charges directly by the mile. This is a variation on the standard percentage discount offered by many other companies.

The company will provide its customers with a tracking device called a Metronome to keep up with data. According to SeattleTimes.com, the device docks beneath the dash using the same port mechanics for diagnostic tools.

What Does It Cost?

“The typical rate is going to be $20 to $45 a month, plus two to five cents a mile,” said Steve Pretre, the company’s CEO. Providing that drivers keep distance traveled to under 10,000 miles per year, it could save them quite a bit, though exact numbers will remain sketchy until MetroMile releases its first round of data next year.

The company joins with 19 others throughout the United States now allowing customers to purchase insurance based on personal actuaries and driving data rather than group-driven plans. Other companies include Allstate, American Family, Liberty Mutual, National General Assurance, Progressive, State Farm, and The Travelers.

Pretre said that once customers get on board with usage-based auto insurance, they tend to reduce their amount of driving between eight and 10 percent. He sees the service as a form of long-term customer engagement in which MetroMile and other companies championing pay-as-you-go policies build brand loyalty through satisfied customers. In comments to SeattleTimes, he said customers “will be loyal … and will tell their friends to sign up.”

On To Something

Whether that’s true, these companies are definitely on to something by promoting pay-as-you-go in all its forms. Most use a special tracking device similar to, or somewhat like, the Metronome, which logs more than just mileage. By being able to monitor hard braking, poor vehicle maintenance, and other factors unrelated to mileage, companies can better identify their biggest risk contributors and do more to offer focused education and incentives to help customers get the most out of their savings.

(Progressive is one company that currently uses tracking devices for more than mileage logged. MetroMile has no plans to move beyond using distance alone as their key determinant.)

Building Support

Regardless of how it is monitored, customers seem to trust insurance companies with the data because acceptance of the pay-as-you-go model continues to skyrocket.

A September survey on usage-based insurance conducted by Towers Watson, a global professional services company, revealed that most (79 percent) indicated they would either buy UBI policies or would be willing to consider the concept. Furthermore, if insurers could guarantee that premiums would not rise as a result of sticking with the pay-as-you-go guidelines, acceptance went up to 89 percent.

Younger drivers (in the 18- to 34-year-old demographic) were the most in favor of UBI policies at 66 percent.

Incidentally, this is one of the key demos that Pretre has in mind with the Metronome program. According to him, the target market is “a younger individual or younger couple living in a city” — perhaps those who take a transit or bike to work, then use the car for errands and weekend trips, “maybe 2,000 to 5,000 miles a year,” he said.

UBI policies are also expected to help lower accident injuries/fatalities and greatly reduce the amount of auto pollution.

Do you think that UBI is the wave of the future, and if so, should companies pay attention solely to miles driven or focus on as other driving metrics, as well? Share your thoughts!

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