Just to watch the driving and sell insurance by the mile


How would you drive if your auto insurance expert was in your passenger’s shoes? This question is the premise behind Just Auto Insurance, a Brentwood-based startup that offers data-driven, prepaid and pay-per-kilometer auto insurance.

It’s just not the first auto insurance company to adjust rates for driving (anyone with a TV is probably tired of listening to Progressive hawk their “Safe Driver Discount”), but they are. the first to combine the idea with a pay-per-mile formula.

It’s an interesting idea and one that seems to be catching on: the company announced at the end of last month a further raise of $ 8 million co-led by Crosscut Ventures, ManchesterStory and Western Technology Investments. (It is above the $ 15 million they have raised so far.)

The new funds will help them expand into new areas and develop features aimed at improving driver safety and reducing the risk of accidents.

“If you don’t drive as much, if flexibility is important to you, or if you are a safe driver, we’ll save you a ton of money,” said Just Founder and CEO Robert Smithson.

Beyond race – and gender-based proxies

Smithson says the company, which is testing its application only in the state of Arizona at the moment, has more than 5,000 drivers registered with insurance. Some members of their minimum liability plan pay $ 10 or less each month for auto insurance – as little as 3 cents per mile.

For full coverage, says Smithson, the cheapest rates are around $ 20 per month. In comparison, the average cost of minimum liability coverage for men in Phoenix, Arizona is $ 55 per month. For women, it’s $ 59 per month.

That men and women pay different rates for auto insurance is exactly the kind of esoteric actuarial voodoo that Just is trying to compensate for. Auto insurance underwriting has historically relied on things like postcode, income, education, race, and gender as indicators of risk.

But according to Smithson, it’s an outdated and unnecessarily convoluted way of thinking – not to mention prejudices – thanks to the smartphones in our pockets, which are able to monitor our driving.

“The reality is we now know how people actually drive,” he said. “There is no more reason to use proxies for risk, we can use real risk. We can assess, do you like doing 65 in an area 35? Do you like coming in bars at 3 a.m. everywhere on the road? Do you stop at stop signs? “

Unfortunately, not everyone is a good driver, and some people just aren’t made for Just’s model.

“The worst female driver we’ve ever seen managed to see her price jump to 71 cents a mile,” Smithson said. “How the hell do you get 71 cents per mile? The answer is to hike in bars 3 nights a week and not pay attention to speed limits or stop signs. She was only with us for about 28 days. before deciding another insurance company would be cheaper. And it is! She shouldn’t be with us. She should be with someone who doesn’t control her driving. “

In addition to the way you drive, the Just app monitors how much you drive, where you drive and what time you drive to calculate your insurance cost. Pricing is adjusted at the end of each month – a practice that sets Just apart from many of its competitors, such as Root and Metromile.

This continuous rate adjustment, according to Smithson, is what gives Just a head start over other companies that only change the payment structure once a year. Not only do safe drivers see immediate benefits, people who don’t fit Just’s model (because they are unsafe or drive a lot) quickly leave the service.

“If you’re a bad driver, it’s cheaper to do it with someone else,” Smithson said. This translates into a more efficient subscription model: Techcrunch reported last week that Just’s direct loss ratio was 65.8% year-to-date, while Root’s was 82% for 2020.

A screenshot of Just Auto’s “ScoreSafe” dashboard

Invest in driving data

With all of this data pouring in on driver behavior, Just plans to use much of the new funding to expand its data science department.

“We are seeing accidents happen,” Smithson said. “We want to look at our data and go back. Why did this happen? Are other people in our clientele doing what caused this accident? And if so, can we tell them not to? “

The idea is ultimately to create a system that recommends new behaviors to drivers to improve their driving and save them money. A push notification could prompt users to leave 10 minutes later for work to reduce traffic on their commute. Another could advise drivers that a certain intersection is particularly dangerous and suggest an alternative route.

The app could offer to call an Uber rather than risk a late night return to the bars. Smithson says they don’t plan to create a navigation app to guide users along the safest and cheapest route, but they don’t rule it out entirely, either.

As hyperbolic as it sounds, there is good reason to believe that their strategy of encouraging safe driving with discounted insurance could also make the roads safer.

“There is a lot of research indicating that motorists are responding to financial incentives,” said Todd Litman, founder and executive director of the Victoria Transport Policy Institute, a transportation-focused think tank. “Using standard price elasticity values, we predict that distance-based auto insurance is likely to reduce the annual mileage of affected motorists by approximately 5-15%.”

Also, says Litman, because these pricing systems particularly encourage the riskiest drivers to drive less, a reduction of 5 to 15% should equate to even more than 5 to 15% fewer accidents. Just’s own data paints a similar picture: The company reports that its customers have crashes that cause injury at a rate of 2.2 per 100 policy years, which is 15% lower than the industry average.

As the business expands outside of Arizona, it will have to overcome the motley regulatory landscape that determines insurance laws in every state. In California, for example, Prop 103 restricts the factors you can use to set auto insurance rates, making apps like Just illegal – a stroke of irony for a company headquartered in Los Angeles. .

Smithson says there may be five other states that have similar laws that will prevent Just from ever being well received by regulators.

“It comes from the best of intentions. It’s not like the California regulators are trying to be painful. It’s just that it got so complicated that our product would be illegal in California,” he said. “I want to hit all the regulators in the United States and say ‘We can use insurance to save lives’.”

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