MetroMile-Kit

According to Techcrunch.com, a startup company called MetroMile is launching beta testing in the State of Washington of a new product: car insurance charged on a “per mile” basis. The $14 million-funded company, the article says, gives away, free, a plug-in device (called a “Metronome”) for your car that connects to a free app. By measuring traffic conditions and gasoline costs, the app teaches you how to spend less on gas and shorten commutes. The device (which also includes a nifty “find my car” feature) measures miles driven: the article describes it as a “fitbit” for your car.

That feature of the device gives rise to a commercial use, MetroMile’s business: car insurance can be sold, to a user who installs the device, with charges computed in a unique manner, on a “per mile” basis. The company claims (assumedly, as to drivers in Oregon and Washington, where it intends to operate) that, if you drive under 10,000 miles a year, buying its insurance can save an average of $400 a year.

Whether you prefer to say it in Latin (“caveat emptor”) or in English (“buyer beware”), buying auto insurance has always been, and still is, an adventure filled with peril and danger. Pricing differentials among various insurance companies, often for the same product, are enormous; complicating the matter further, companies differ greatly in the terms and conditions of the coverages provided, rendering decision making even more complex. Frequently, you are not sure what you have bought until you have the misfortune to need to make a claim.

For example, two competing policies might both offer collision insurance with the same deductible, $500 for example. But one company might offer a “new car replacement” provision: if your car sustains a total loss within one year of purchase, the loss payable is computed based on the cost of replacing your car. How you factor in the benefit of these differences, from a view of potential cost and benefit, can be very problematic.

Then there is claims service. Some companies may be helpful and forthcoming, others stingy and difficult. You can check with friends, business associates, and internet sources to see if you are selecting a consumer friendly company that will help you when you need it.

One possible solution to shopping for car insurance presents only a partial solution: getting a trustworthy independent insurance agent, who can help you compare competing insurance products, services, and premiums. The problem is that many large insurance companies “direct market” only: they employ “captive” agents (whether employees or not), who sell only their insurance products. An independent insurance agent will not be able to “comparison shop” the insurance policies offered by those companies; and, conversely, an employee of a so-called “direct marketing” company will not be able to compare, for your consideration, the features of competing policies offered by other companies.

How, then, will Metro Mile’s new offering, if and when it comes to your state, affect your insurance shopping? On its face, the idea sounds like a good one: purchase the insurance that you need, and pay “per mile,” which seems a fair criterion upon which to base premiums. But it’s not entirely new to do that: for many years, most insurance companies have asked their clients, among other things, to disclose how many miles their vehicle is driven each year. Your answer to that question was stirred into the pot by the insurance company, along with other legally allowed criteria, in a manner known only to the company; the result was a premium quotation that you could accept or reject, after comparing other competing quotations.

Much sounds intriguing about Miracle Mile, but much remains to be seen: will their “per mile” pricing be the sole criterion determining premium cost? If so, will their pricing be competitive, compared with competing insurance carriers? Will everyone save with their pricing model, or just some customers? How competitive will the coverage products they offer be? Will their insurance products have the “bells and whistles” (like, for example, the new car replacement coverage) that their competitors might offer? Is their device just something cool, or will it really give drivers extra savings in time and commute management? How troubling are the potential privacy concerns of having a “fitbit” in your car?

Anything that adds to the competitive landscape for insurance purchasers is good news. Creativity in pricing insurance products is a good thing for the consumer. But nothing is going to replace the need for smart shopping, whether you are considering purchase of insurance from Miracle Mile, one of the insurance “majors,” or a smaller company suggested by an independent agent. It is, and will be, “buyer beware” for a long time.

Photo credit: https://www.flickr.com/photos/portlandafoot/8248602176/

Ralph Jacobson received his law degree from Stanford University in 1969. His concentration has been in personal injury for over 30 years. He has written numerous articles for the CEB Civil Litigation Reporter, a leading professional journal for attorneys.