Per mile car insurance makes debut

Published: September 16, 2015

Updated: July 24, 2018

Author: Luke Jones

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Auto insurance providers are becoming increasingly creative as they introduce new policies to keep up with changing economic situations and a new technological landscape. One company in the United States has now introduced a new car insurance policy that charges its customers per mile, and not over a traditional coverage term.

The car insurance industry is changing across the world, including Ontario. Uber has challenged the perceptions or personal vs. commercial, while the advent of autonomous vehicles means car insurance companies are faced with new dynamics in deciding who is liable.

While this new per-mile rate is only available in Pennsylvania through Metromile at the moment, it is easy to see how this could soon arrive in other regions like Ontario, especially if the model is successful. After-all, insurance providers have oft looked for ways to offer incentives and discounts to consumers.

The new policy from Metromile means drivers can pay for their limited driver and in effect are not offsetting the higher premiums for more frequent car users.

“It’s fairer,” said Metromile CEO Dan Preston. “We found, in our recent survey, that more than 60 percent of Pennsylvania drivers drive less than 20 miles per day, and are considered low-mileage drivers who drive less than 10,000 miles per year. Our survey also showed nearly 48 percent of Pennsylvania residents drive less than 10 miles per day.”

The company conducted plenty of research, following 384 of its customers over 191,699 trips and says that the new policy helps ease traffic, while accidents and road maintenance costs would both decrease:

  • On average, they found a 6 percent decrease in driving after they switched to per-mile car insurance.
  • Overall, 54 percent of test-drivers drove less after switching to pay-per-mile insurance.
  • Looking at users who drove more than 20 miles per day, more than 80 percent drove less after switching.
  • They would help save
  • There would be 60 million metric tons less of carbon dioxide emissions.
  • There would be 150 billion fewer miles driven.

Drivers opting for this policy would be given an electronic device that is used to track how many miles are covered and how much the car is used. The car owner can even look at the data on a smartphone app and see information about their driving habits and other diagnostics.

While this kind of insurance model is not yet available in Canada, it seems as though it is something many of the major providers are considering and is something that has been discussed before. Indeed, several of Ontario’s chief car insurers have talked about technology and how it can be used to track a driver’s car use. A per mile policy is a logical next step.