Pay-as-you-drive auto insurance is becoming a mainstream reality for many insurance companies, and is proving popular with Millenials.

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

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

PC360 had the opportunity to speak with Metromile CEO Dan Preston about what usage-based insurance might mean for the younger generation of drivers. Here is a transcript of our conversation.

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

Preston: It started with looking at the disjunction between modern car ownership culture and the insurance options available. 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 car usage and ownership has changed, then shouldn't the operation and maintenance of cars change, too? No one should have to pay huge insurance premiums on a car they don't use very often.

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

PC360: What telematics technology does Metromile use?

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

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

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

Preston: We've seen very strong interest in markets where we are available. Plans are in place to make pay-per-mile insurance available in additional markets this year. Because Insurance is regulated at the state level, applications to each state involve considerable lead-time for approval, and subsequent technical programming is needed to accommodate differences in rules for each state.

PC360: How does usage-based insurance resonate with younger drivers?

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

PC360: How do you see the insurance industry evolving as technology grows, specifically in the rideshare marketplace or with self-driving cars?

Preston: We're excited about our partnership with Uber to solve a gap in the insurance marketplace today. Clarity over coverage has been contentious for several years now, and we are happy to provide peace of mind to drivers. The per-mile insurance covers drivers during personal use and Period 1 (when the app 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) in traditional auto insurance pricing and we're always looking for new ways to use our technology to make all costs associated with car ownership more fair. Many Uber drivers may not log a lot of 'personal' miles, so this could be a great way for them to save on premium as well. Unlike other personal auto insurers, we are not upcharging for recognizing a vehicle being used for both personal and rideshare.

Special Reports /

Pay-per-mile is here: Metromile introduces usage-based auto insurance for Uber drivers

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