How We Got Here: A Brief History of Pay-per-mile Insurance

Here at Metromile, we pride ourselves on being pioneers of the pay-per-mile car insurance model, providing a fair and affordable insurance for low-mileage drivers. Technically, we weren’t the first to introduce this idea, but we were (and still are!) the leaders in making it seamless, scalable and easy for everyone. We were founded exactly five years ago, and now have customers in seven states, from California to New Jersey (with many more coming soon). In celebration of our 5th birthday, let’s take a step back and explore how we got to where we are today.


One of the first times the per-mile insurance concept was introduced was in a report by William Vickrey in 1968, and later in a  report by the Brookings Institution in 2008. They hypothesized that if people paid for insurance by the mile, they would be incentivized to drive less since their bill would be based on mileage. The less someone drives, the less they would pay. To prove out the Brooking’s Institution’s theory, we recently ran a study with the Jackson Institute for Global Affairs at Yale University and found that our customers are already driving 6% less after switching to Metromile. This seemingly small number can actually have a significant impact on our economy and environment, especially if everyone reduced their driving by this amount. The benefits to per-mile insurance are clear, but the major insurance companies have been wary to use this model since low-mileage drivers (65% of the US, to be exact) are subsidizing the small handful of people that drive the most.

There have been a few smaller companies that ventured to test a per-mile insurance model, but they required setup that wasn’t exactly user-friendly. One company required a mechanic to install a mysterious black box in the car, and another relied on consumer-submitted photos taken of the odometer reading. None of them made for a hassle-free experience, which is necessary for the person that only occasionally uses their car.

That’s where Metromile comes in. We knew there was a need for a more fair car insurance, but the solution couldn’t involve complicated setups or time-consuming reports. Technology would be an important factor to measure miles driven, and it needed to be plug-and-play. Your mechanic already uses your on-board diagnostics port (OBD) to obtain car health data, so why not use the same port to gather mileage data? We had a solution, and the catalyst was that the sensors we needed to do this become inexpensive and reliable. So in 2011, we introduced a simple way for low-mileage drivers to save money with pay-per-mile car insurance. Just plug a device (we call it the Pulse) into the OBD-port of your car, and it will automatically track mileage. On average, we are saving our customers $500 a year, so we are pretty confident in our solution.

So where are we off to next? There are a lot of exciting stops on our roadmap, from state launches to helpful new app features. If you are currently a Metromile customer, we could not have gotten here without you, so we thank you all for your support. And if you aren’t currently a customer and don’t drive much, you can learn more about our innovative pay-per-mile insurance offering here!