Dan Preston is the CEO of Metromile.
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When Elon Musk announced that he was getting into car insurance, I wasn’t surprised — this is an industry full of opportunities for fresh thinking. I also wasn’t surprised he ran into some glitches on launch day.
I understand why Musk is frustrated: Tesla cars are packed with pioneering safety technology, but they are comparatively expensive to insure. We know firsthand; Metromile insures many Tesla owners (up 200% in the past year alone). Our data shows they are no more accident-prone than drivers of other cars, while their claims run about twice as much as other cars due to the high cost of repairing the on-board technology.
From the expansion of autonomous navigation to the explosion of ride- and car-sharing platforms, technology is transforming both cars and car ownership. Insurance is ripe for disruption, too, which is why Metromile was founded eight years ago with a pay-per-mile model based on someone’s actual driving.
But drivers also value the service itself — beyond savings — whether that means a feature that monitors the car’s condition or an intuitive, design-first claims system. Consumers may be attracted to low prices, but how long they remain a customer depends on their experience.
The long-term opportunity lies in reducing the conflict and distrust between insurance companies and their customers. Right now, the relationship can be very transactional and full of tension. Insurers worry about risky drivers and fraudulent claims, while customers worry about being short-changed by obscure policy loopholes. It’s an adversarial process, and it can be grueling.
Technology offers massive opportunities for personalized insurance that can lower rates. We save many of our customers hundreds of dollars a year. Likewise, we recently partnered with Turo, a leading car-sharing company, to create fractional insurance to help reduce the costs of car ownership.
And we’re on the cusp of even larger changes. Sooner or later, self-driving cars will become mainstream. As a result, cars will be safer and experience fewer accidents. While some accidents like a falling tree will happen no matter how advanced a car may be, we understand fundamentally that no two miles driven are the same; a mile driven autonomously could and should be insured differently than one driven by a human.
In the meantime, technology can reduce the tension between insurers and their customers. One way is by enabling personalized insurance customized to individual needs. Another is to make the claims process smoother and easier. Through AVA, our AI-powered claims system, we see the power of using a car’s telematics data to reconstruct an accident and assess the damage quickly — enabling us to pay some claims within minutes.
That said, irresponsible technology can create traps. Just imagine how fast a fully-automated AI system could alienate customers by spitting out instant decisions they don’t like, or not being able to be guided by an experienced, empathetic claims-professional after a stressful accident. These are very nuanced issues; they require employees with exceptional insurance experience who can bring out the best of the technology while avoiding the roadside ditches.
Without a doubt, I love Musk’s challenge to the status quo. But as Tesla pauses for an “algorithm update,” I hope they take my advice: insurance is about more than low prices. We need fresh thinking from carmakers and insurers alike.