One of the greatest weaknesses of traditional insurance pricing is the reliance on credit scores and basic demographic data, such as age and zip code, to determine cost. Because customers can’t control any of that data, they’re stuck with premiums that may not have anything to do with how often or how safely they drive. One way to increase customer loyalty and safe driving habits is to tie premiums to something drivers can control. That’s where UBI comes in.
At Metromile, a pay-per-mile insurance company, premiums are dependent on drivers’ use and behaviors, such as driving speed, safe lane changes, and how often drivers are behind the wheel. Through high-fidelity telematics, data is gathered during driving trips in real time and used to determine the premium.
Metromile’s Ride Along coaching program gives tips for driving more safely. It also indicates why those behaviors impact the price. In this way, the UBI model lays the groundwork for the insurance of autonomous vehicles, as we discussed in our previous blog entry.
“We see this as a continuous evolution that takes us to what autonomous vehicles will be: the ultimate safe experience of driving in the future,” said Metromile’s Chief Technology Officer Paw Andersen in a recent webinar with EIS and analyst firm Novarica. “It used to be that it was seat belts that had a real impact on safety. But today it’s lane-keeping assistance, emergency braking, all the way up to Tesla’s autopilot. We see this as a unique opportunity in the insurance industry to make pricing and product experience something that is uniquely fair and personal. We want to give the control to the consumer.”