CEO Dan Preston said the company's strategy is to poach urban drivers who overpay for insurance -- effectively subsidizing high-mileage drivers -- under insurers' current risk-pooling formula.
The company checks their mileage using a gadget called the Metronome that plugs into a car's OBD-II diagnostic port and submits updates over a cellular connection.
Metromile offers other features through iOS and Android apps. In Chicago and San Francisco, the car will send a warning to its owner's smartphone if its GPS signal suggests that the car needs to be moved out of a street-cleaning zone.
"The data that's coming out of your car every day for a long time has only been accessible to your mechanic," Preston, 29, said in an interview at the company's headquarters here. "Now, as a consumer, you have access to this data. By itself it may not mean much. But we can put that to use for you."
Metromile hopes to accelerate the transition.
Progressive, which launched its Snapshot service in 2007, has less than 10 percent of its overall customers covered by a UBI policy, Gage said. He said market forces are responsible for the slow rollout.
If a company gives low-risk drivers too much of a discount, insurers will make less money overall unless they start charging higher premiums to high-risk drivers, Gage said. If a company were to do that, its customers would flee to another insurer that wasn't moving so quickly to UBI pricing.
"So far, the only thing they've done is to offer discounts for better drivers, based on their performance," Gage said. "They haven't raised rates. They don't want to run off customers at this stage."
Metromile has no existing base of customers to worry about.
Indeed, it is a classic San Francisco startup, with just 40 employees, mostly in their 20s and 30s. During a recent visit, its office was stacked with cardboard boxes of Metro-nomes that needed to have their software updated. An employee sat at a table around the corner, hand-stuffing envelopes that were headed to policyholders.
Metromile follows most of the same underwriting principles that larger insurance companies do, using age, gender and driving history to set a per-mile rate for each customer.
The company will offer an insurance policy to anyone, but because of the industry's risk-pooling practices, the break-even point is around 10,000 miles per year. Drive more than that, Preston said, and conventional insurance would probably be cheaper.
Metromile's main difference is in its reliance on miles driven, rather than driving habits such as braking patterns, which the big insurers use to set UBI rates.
The reason is behavioral. Customers don't like being tracked, Preston said, and they don't like being told that they're bad drivers who brake and take turns too hard. He said 70 percent of the variation in insurance claims filed can be chalked up to how much customers drive, with just 30 percent tied to driving habits.
"At some point, everyone is going to have to adopt this model," he said. "Really, the fair way to charge is per mile."