Have you ever asked why you’re paying for cable TV channels you’ll never watch?
Or why you can’t save on rent though you’ve never dipped even one toe in the condo swimming pool?
If this sounds like you, Metromile Auto Insurance may rev your engine, too.
The San Francisco-based startup bases its auto insurance premiums, in part, on how much you drive. The less you drive, the lower your monthly rate.
It’s a novel idea: Why should you be paying car insurance when your vehicle is safely parked in your garage?
Well, insurance isn’t quite that simple. But if you’re an infrequent driver, and you live in Metromile’s limited, 8-state coverage area, the company could save you hundreds of dollars a year.
How Metromile Is Like Traditional Insurers
Pay-by-the-mile car insurance sounds like a game changer, and it is innovative.
But when you open the hood to see what makes Metromile click, you’ll find some familiar, time-tested insurance mechanics.
Just like a traditional auto insurance company, Metromile will check your driving record and credit history and will ask about the age, model, and safety features of your vehicle.
This data helps determine whether you’ll get approved for coverage and how much your premiums will cost if you do get approved.
In return for paying the regular premiums that keep your policy active, you can file a claim if you’re in a wreck. Depending on your coverage, your insurance company should help pay for the damage.
If you are the driver at fault in a wreck, your insurance company should pay to fix or replace the other car and pay the other driver’s (and his or her passengers’) medical costs.
So, just like other insurers, Metromile assesses your risk as a driver and charges its rates based on that risk.
How Metromile Differs from Traditional Insurers
What makes Metromile different is the way it bills your premiums.
Rather than charging a fixed premium that you pay either up front or as a series of equal monthly installments, Metromile assesses part of your premiums based on your driving distance.
The less you drive, the lower your monthly insurance bill.
Notice we said your driving distance determines “part of your premiums.”
The other part of your Metromile premium would come from your base rate. If you didn’t crank the car at all during the month, you’d still pay this base rate.
The base rate keeps you from truly paying for insurance as you drive, but it makes sense when you think about it: bad things can happen to your car even when you’re not driving it. (Think theft, damage from a falling tree limb, parking lot collisions, etc.)
On top of the base rate, Metromile charges your per-mile rate multiplied by the number of miles you drove.
How Metromile’s Numbers Work
Even with a base rate in place, people who drive infrequently can save money.
For example, let’s assume you qualify for a $50 base rate and a per-mile rate of 5 cents.
If you lived 30 miles from your work, which means you might commute about 1,200 miles a month, Metromile would calculate your bill this way:
$50 base rate + (0.05 per mile rate x 1,200 miles = $60 per-mile rate) = $110 monthly premium.
If you worked only 10 miles from home and drove only 400 miles a month, here’s what you would pay.
$50 base rate + ($0.05 per mile rate x 400 miles = $20 per-mile rate) = $70 monthly premium.
In this example, driving 800 fewer miles would save $40 in auto insurance premiums for the month. Carried through an entire year, the savings would add up to $480.
Metromile’s base and per-mile rates differ among drivers since the company uses your driving record, vehicle information, and credit history to calculate these rates.
What Else Factors Into Your Base and Per-Mile Rates?
Anytime you buy insurance, you make some choices which directly impact your premiums. In most cases, these policy decisions influence your fixed premium rate.
With Metromile, these choices help determine your base and per-mile rates:
- Your deductible: The higher your deductible, the lower your base and per-mile rates. Why? Because you’d be paying more for your own repairs before the insurance company kicks in. Deductibles usually apply only to comprehensive and collision coverages (which pay to fix or replace your vehicle).
- Your liability coverage: The higher your liability coverage, the higher your base and per-mile rates. This is because higher liability coverages mean the insurance company could pay higher claims on your behalf. (This coverage pays to fix or replace a car you hit in an at-fault accident and pays the other driver’s and passengers’ medical bills.)
- Other coverages and extras: Not all states require all auto coverages. If you want to protect yourself from uninsured or underinsured drivers, carry coverage to pay your own medical bills after an accident, or opt for roadside assistance or rental car reimbursements, for example, you can expect to pay a higher base and per-mile rate.
If you want these coverages with Metromile, chances are you’d want them with another insurer, too.
With another insurer, these factors would impact your fixed rate.
So at the end of the month it still boils down to this: If you drive infrequently, you can likely save with Metromile. If you drive a lot, you may pay more than you would with a traditional fixed premium policy.
What About Road Trips or Unexpected Driving?
Since you can save by driving infrequently, wouldn’t you pay a lot more for long trips?
Yes (then no). The more you drive, the more you pay, but only up to a point.
Metromile will not bill for more than 250 miles in one day (150 in New Jersey).
This cap helps keep costs under control if you go on a 900-mile trek to the beach or suddenly need some home cooking and take off on an impromptu drive to visit out-of-state relatives.
Having a daily mileage maximum prevents out-of-control costs from unusual driving activity. What determines your savings, though, will be your regular driving habits.
If you drive a lot — more than 1,000 a month which is the national average, for example — you may end up paying more with Metromile than you would with a traditional insurer.
How Metromile Knows How Much You Drive
Tracking mileage takes time, effort, and attention to detail. Modern technology like your smartphone could make it easier, but you’d still have to remember to send in your mileage.
Metromile takes all of this clerical work out of your hands.
When you get approved for coverage, you’ll get a Metromile Pulse device which plugs into your car’s on-board diagnostics connector (OBD-II), which is likely under your hood.
The Pulse device measures your mileage and sends the numbers to San Francisco so Metromile can calculate your monthly bill.
Another Benefit of Metromile’s Pulse
Since you have a device permanently installed in your car’s diagnostic port, you can tap into the data flow using Metromile’s smart driving app.
The app can tell you, for example, where you parked your car if you can’t remember.
The app can also tell you why your service engine light just turned on.
This feature could save you a trip to the mechanic, or at least let you know what you’re dealing with before showing up for service.
But, What About Your Privacy?
If you don’t like the idea of your insurance company knowing where you are at all times, Metromile is sensitive to your concerns.
The Pulse device sends only your mileage to Metromile, the company says.
Metromile does not record your GPS data or your driving tendencies (such as hard braking or rapid acceleration).
Anyone super sensitive to personal privacy may still worry. It’s up to the customer to weigh potential privacy concerns against potential savings.
Filing a Metromile Claim and Other Customer Service Needs
Anyone who has filed an auto insurance claim knows there are two sides to your relationship with an insurer:
- Sure, you want fair premiums and easy-to-use customer service for billing and coverage changes.
- But if you’re in a wreck and you need to file a claim, you want auto insurance coverage you can access quickly and easily.
Metromile does quite well with the first side of the equation.
Getting a quote, opting into a policy, changing the coverage details, paying your bill online — it’s a seamless user experience.
The other side of the equation — responding to claims — is a little more cloudy.
First off, as a new company, founded in 2011, there’s not much data to analyze compared to a century old insurer.
A.M. Best, the independent agency that rates the financial health of insurance companies, has given Metromile excellent marks.
That’s a great sign.
The Better Business Bureau also gives Metromile an A+ rating, citing the company’s commitment to responding to negative reviews.
Customers have, however, complained about long wait periods before Metromile processes a claim.
Metromile says it’s working to improve this process.
In fact, the company identified the hiccup in its claims process, saying its reliance on third-party underwriting caused the delays.
To fix the problem, Metromile recently acquired an insurance company so it can underwrite its own policies.
Metromile’s responsiveness to complaints and its willingness to take action to fix problems should be a positive sign for potential customers.
Metromile Makes Sense (If It Fits Your Life)
Ideas that make sense tend to gain traction in the marketplace.
Paying for insurance as you drive makes sense, in theory.
What matters is whether it makes sense for your driving habits.
If you live in a Metromile-covered state (California, Oregon, Washington, Arizona, Illinois, Pennsylvania, New Jersey, or Virginia) and you don’t drive very much, the coverage may work for you.
How much driving is “not very much?”
The national average is 12,000 miles a year.
If you drive less than that, especially if you drive less than 10,000 a year, give Metromile a closer look.
If you drive more than 12,000 miles a year, you’re probably better off with a traditionally fixed premium.