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.

history_of_pay_per_mile_insurance

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!

21 responses to “How We Got Here: A Brief History of Pay-per-mile Insurance

    1. Hi Diego – thank you so much for sharing, we love hearing from our happy customers! If you are open to having your quote featured on our website or blog, we’d really appreciate if you could send a quick note about your experience to stories@metromile.com. Thank you!

  1. Metromile rocks! Thanks for providing a great service. I’ve been saving at least $500 a year and love that I can get alerts about car codes, track my trips, etc. I’ve recommended you to everyone.

  2. I am very happy with Metromile insurance. For an elderly lady as I am and on a very low budget, this is the best insurance and the most amenable to my needs that I could find. It is a miracle for us “old folks”–big time.

  3. Actually, your information as to the origins of per mile insurance is incorrect. William Vickrey advocated a concept along those lines 40 years earlier than Brookings:

    http://www.vtpi.org/vic_acc.pdf

    Bravo on your product. I’m just waiting for the “death spiral” to hit the auto insurance world… When it does, Metromile will be very well positioned to succeed.

    1. Hi Asher- We noted that the Brookings report was one of the first times, not the first instance, but we’ve updated the post with this information so thanks for sharing! And thanks for the kudos!

  4. So far I’ve calculated an 800 a year savings. Customer service has been Awsome. You reimbursed me for a 60 dollar tow in five days. Plus I can see the miles I drive and the health of my car. So far so good?

    1. Hi Marla- So glad to hear about the great experience you are having (and money you are saving) with Metromile! If you are open to having your story shared on our blog our website, please send us a note at stories@metromile, we’d really appreciate it!

  5. I am SO happy with Metromile!! I have signed up w3ith several other insurance companies and NONE of them gave me the rates that you do!! My problem was that I live in a tourist town and RARELY do I go out of town but I was still charged these huge premiums and on a fixed, more or less, income that becomes REAL SPENDY REAL FAST!!! So thank you METROMILE for giving me one of the BEST deals I have EVER had in my life!!

    1. Hi Cheryl- We love hearing from our happy customers like you, thank you so much for sharing! If you are open to having your story shared on our blog our website, please send us a note at stories@metromile, we’d really appreciate it!

  6. I don’t think about it at all. I don’t modify my driving at all.
    My goal was just to save s little over the flat rate insurance companies with my normal driving, which it does. Maybe $25/mo less than others.
    Plus, it was one of two companies that would cover UBER drivers, which I was (for 2 days and realized, it’s not for me).
    On the other hand, if I had to start driving more for some reason, then Metromile would work against me, and I’d probably have to cancel it

  7. I commented that I would not endorse this low mileage to others. Generally, I won’t. However, those who do drive little I will. I am not a low mileage person and don’t like the fact that even short trips to other states can cost me a fortune when I want to drive.

    1. Hi William – did you know we have a road trip bonus? Any miles driven over 150 per day (250 in WA) are free, but you will be covered the entire time. Let us know if you have any additional questions!

  8. $500 a year? That’s nothing…you guys are saving me like, $500 every three months. I pay about $150 through you guys to drive my 05 mustang v6 5 speed convertible. Everyone else wants $300-$450 a month. Mainly being I just turned 20, and have a previous accident.

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