You wouldn't buy an unlimited fare card if you only took a few transit rides per month, but when it comes to car insurance that's pretty much how things work. Drivers who are similar in age, gender, and residence pay about the same premium even if some drive 5,000 miles a year and others 50,000 miles. The problem is not only that low-mileage drivers end up subsidizing high-mileage ones — it's that everyone has an incentive to drive as much as they can.
One idea to undercut this system is pay-per-mile car insurance. Earlier this month at The Atlantic, Matthew O'Brien explained (via this 2008 Brookings report; PDF) just how much America stands to save with such a service. Driving would fall 8 percent nationally; oil usage and carbon emissions would drop 2 and 4 percent, respectively; fewer traffic and accidents could be worth upwards of $60 billion a year.
Since city residents have transportation alternatives at their disposal, they're likely to benefit from mileage-based systems more than most. That's the basic idea behind MetroMile, a new per-mile car insurance company that launched earlier this month in Portland, Oregon. While conventional car insurance companies dabble in mileage programs, MetroMile was created explicitly with that low-car lifestyle urban driver in mind — even down to the name.
"The profile is people who live in a city, take public transportation, ride their bike to work," says Steve Pretre, C.E.O. and co-founder of the company. "That has been a growing population, and particularly a lifestyle change people have been making, over the last 10 years — to use a lot more alternative transportation."
MetroMile users receive a device called a Metronome (sadly, the "N" isn't capitalized) that plugs into the car and tracks mileage in real-time. Drivers pay a monthly base rate that's around $20-30, says Pretre, then pay 2 to 6 additional cents per mile. He says anyone driving fewer than 10,000 miles a year should start to save, and once you get down to 8,000 miles, the savings approach 20 to 25 percent over major car insurers.
"Everyone we talked to who lived in the city basically said, I live in a city, I pay a lot for insurance, but I hardly drive at all, and that just doesn't seem fair," says Pretre. "The more we did the analysis around it, we said, yes that's absolutely true."
Pretre says he realized Portland would be the ideal launch city when he went for a run there, during a visit, on a cold and rainy February morning. When he was stopped at a drawbridge, dozens of bike commuters pulled up behind him to wait as well. He recalls thinking that if Portlanders were willing to bike in such lousy weather, they must be really serious about choosing not to use their cars.
"It's very conscientious about those decisions," says Pretre of Portland, "and very proud of the fact that it's a better way of living."
Since it can't compete with the big car insurance companies on advertising, MetroMile plans to use a grassroots marketing approach. They've already reached out to bike groups in Portland — the blog BikePortland recently hyped the service — and will work with transit agencies (and perhaps car-share operations) too. The company plans to expand to similar cities, and Pretre says regulations in their target states all support per-mile insurance.
The biggest hurdle facing MetroMile may be the privacy concerns that come with tracking a person's driving behavior. The Metronome tracks basic mileage and, if drivers choose, can also track GPS location data. That idea there, says Pretre, is that a person may want to learn about their own driving patterns and find ways to drive less. In any event, he recognizes the company will have to build trust over time, and says it's tried to keep things simple as a result.
"We aren't using when, where, or how they're driving in that pricing," he says. "We wanted to make it very transparent. Here's the miles I drove, here's my rate per mile, here's what I pay."