This self-driving car trend is something it seems everyone is talking about, and many companies are trying to jump in on it. From self-driving cars already turning over engines in Pennsylvania, to Lyft saying close to no one will own a car by 2025, to IBM’s driverless shuttle, the question remains who will need car insurance.
Apparently, it’s an appealing question.
An on-demand startup — Metromile — just landed $191.5 million in funding for for its pay-per-mile insurance. The funding, which is “primarily equity,” according to CEO Dan Preston, will be used to acquire insurance carrier Mosaic Insurance for underwriting of its policies. Funds will also be used to build out the platform and to expand into more states.
Who were all these funders? Quite a few. Canada’s Intact Financial and China Pacific Insurance, New Enterprise Associates, First Round Capital, Mitsui and SV Angel.
They also included Metromile Founder and Chairman David Friedberg, as well as Dallas Mavericks owner and “Shark Tank” Shark Mark Cuban.
Surprised by the $191 million number? You’re not alone. Analysts are nodding with you because the company’s been around since 2011 and had only raised around $14 million to date.
Metromile is ready to rev up, having acquired licenses to operate in all of Uncle Sam’s 50 states, despite currently underwriting policies in only four right now: New Jersey, Oregon, Pennsylvania and Virginia. Metromile has its eyes next on policies for California, Illinois and Washington.
How does Metromile work? It sells insurance directly to those who will use it. That includes Uber, which saddled up with Metromile in 2015.
Metromile has carved out a reputation for disrupting some of the more obvious inefficiencies of the standard insurance business model and the pricing that has been developed around it.
“Sixty-five percent of drivers pay higher premiums to subsidize the minority who drive the most,” Preston explained. “Our go-to market strategy is focused on large urban areas and aimed at developing a brand with each city that we roll out into. The people who switch to pay-per-mile insurance commute differently. They take multiple forms of public transit, walk, bike or even rideshare to work, so a usage-based option makes more sense to them.”
Metromile is clearly taking on the big boys, like Geico, Progressive and State Farm. However, it’s not the only one doing this. There are other companies with pay-as-you-go car insurance plans right now.
Preston argued that Metromile has a different format. No doubt changing the landscape for transportation, driverless cars and shared cars will present new opportunities and challenges for Metromile.
“What many people call pay-as-you-go insurance is actually behavioral-based insurance,” he said. “Metromile is the only multi-state per-mile insurance product and does not rate based on behavior other than miles driven.”