COVID Closures Mean Increase in Pay-Per-Mile Auto Insurance Coverage

Over the past few years, auto insurers have created more and more policies that allow customers to get insurance coverage only for the distance they actually travel, providing an alternative to general policies that cover unlimited kilometers. . Companies like Allstate, the fourth The American auto insurer and startups, including Metromile Inc., which went public this year through a merger with a specialist acquisition company, have pushed to extend this coverage.

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“While the pandemic has certainly accelerated this trend and accentuated it for some time, I also believe there will be an element of it that will persist,” Shapiro said in an interview. “There was a very good business case for paying by the mile before the pandemic, and there will be after the pandemic.”

While the majority of recent interest in Allstate’s pay-per-kilometer program has come from new customers, some existing customers have changed their behavior as they cut back on driving, Shapiro said. The insurer’s Milewise offering, which this week expanded to Oklahoma and Wisconsin and is now in a total of 19 states, uses a plug-in device to track a customer’s driving, except in certain newer Ford Motor Co. vehicles that have built-in modems that share data with the program.

Auto insurers initially took advantage last year as the pandemic began causing closures across the country, leading to a drop of nearly 40% fall in driving last April and a total of 13% decline in 2020. Companies, including Allstate, have refunded some premiums to customers as auto insurers have benefited from the decline in driving, which tends to lead to fewer accidents.

The future of auto insurance will involve more pay-per-kilometer policies and telematics offerings, which will allow insurers to track driving behavior and reward customers in better and safer ways, Credit analyst says Switzerland Group AG, Mike Zaremski. While there could be execution issues with insurers developing the right technology, companies that don’t adopt it could lose their good customers, leaving the worst drivers behind as customers, he said. he declares.

“The pandemic has accelerated the adoption of pay-per-kilometer and telematics because there are a lot of people who realize that ‘I don’t drive that much’,” Zaremski said in an interview. Technologies can also benefit insurers because “if you have the capacity to deploy this technology successfully, your earnings volatility should be much milder.”

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Justin D. O'Neill