Pay-as-you-drive auto insurance is becoming a mainstream realityfor many insurance companies, and is proving popular withMillenials.

At the same time, "sharing" services like Uber and Lyft arepresenting new problems for traditional insurers by blurring thelines between personal use and commercial operation.

Enter Metromile, a California-based insurance company, that hasused telematics to implement a new policy for Uber partners.

PC360 had the opportunity to speak withMetromile CEO Dan Preston about what usage-based insurance mightmean for the younger generation of drivers. Here is a transcript ofour conversation. 

PC360: What was the push to start apay-as-you-drive insurance system?

Preston: It started with looking at the disjunctionbetween modern car ownership culture and the insurance optionsavailable. Today, people get around in a variety of ways,especially if they live in the city – by car, public transit, bike,and maybe even their own two feet. Which got us thinking – if carusage and ownership has changed, then shouldn't the operation andmaintenance of cars change, too? No one should have to pay hugeinsurance premiums on a car they don't use very often.

We saw a great opportunity to disrupt the insuranceindustry and help make the experience of having a car as simple asit can be. By taking our deep understanding of data andtransforming it into information and services that make having acar less expensive, more convenient, and simply smarter, we make itso that you can enjoy the benefits of having a car, without theunnecessary expenses and hassles.

PC360: What telematics technology does Metromileuse?

Preston: Our device, the Metronome, plugs directlyinto the OBD-II port and keeps track of the miles you drive.Metromile does not use driving behavior or style to calculate thecost of insurance. The customer's base rate is based on drivinghistory, garaging zip code, and age. We do not take intoconsideration behavioral factors such as speeding, acceleration andhard braking.

Think of the per-mile rate as a much smaller "fixed"rate than traditional auto insurance. If a risky driver would haveto pay $2K/year and a safe driver would have to pay $1K/year, theper-mile rate reflects the same delta in risk. For instance, a safedriver may pay 3 cents/mile, a dangerous driver may pay 6cents/mile. We use the same traditional factors to determine a ratewhich is reflected in both the base rate and the per mile rate.

PC360: Is that leading to other technologies or programsacross different states?

Preston: We've seen very strong interest in markets where we areavailable. Plans are in place to make pay-per-mile insuranceavailable in additional markets this year. Because Insurance isregulated at the state level, applications to each state involveconsiderable lead-time for approval, and subsequent technicalprogramming is needed to accommodate differences in rules for eachstate.

PC360: How does usage-based insurance resonate withyounger drivers?

Preston: Per-mile insurance is a perfect example ofa product that resonates with how Millennials live. They are partof the majority subsidizing the minority who incur the most cost tothe system. Because they don't drive many miles, they are likely tosave on insurance premiums with a model like per-mileinsurance.

PC360: How do you see the insurance industry evolving astechnology grows, specifically in the rideshare marketplace or withself-driving cars?

Preston: We're excited about our partnership withUber to solve a gap in the insurance marketplace today. Clarityover coverage has been contentious for several years now, and weare happy to provide peace of mind to drivers. The per-mileinsurance covers drivers during personal use and Period 1 (when theapp is on and they are waiting to be matched to a rider).

One thing our company has identified is the"unfairness" (low mile drivers subsidizing high mile drivers) intraditional auto insurance pricing and we're always looking for newways to use our technology to make all costs associated with carownership more fair. Many Uber drivers may not log a lot of'personal' miles, so this could be a great way for them to save onpremium as well. Unlike other personal auto insurers, we are notupcharging for recognizing a vehicle being used for both personaland rideshare.