May 13, 2020 In Arizona Just Auto Insurance launches pay-per-mile auto insurance product

A brand-new, pay-per-mile auto insurance product has launched in Arizona. Released by Los Angeles-based insurtech, Just Auto Insurance, Inc. (Just), the new telematics-based solution targets lower income consumers with a quick prepaid product, which calculates premium based on individual risk, not demographic correlations.
Just was founded in 2019 by Robert Smithson, Greg Ferkel and Murray Macdonald, with a twofold mission: to increase the availability of auto insurance, and to use technology to make the roads safer. Their flagship product is unlike other telematics-based, pay-per-mile solutions in the marketplace in that it targets lower income consumers – those whom CEO Robert Smithson says are “poorly served by existing carriers.”
He explained: “Lower income consumers are the people who are most likely to be discriminated against as part of the traditional auto insurance quote process. They’re more likely to live in zip codes with high auto insurance rates, and they’re also likely to be more dependent on their car rather than less dependent, because they’re unlikely to be able to afford other transportation options like Uber.
“Most egregious of all is the use of credit scores in setting auto insurance rates. Insurers use credit scores because they’re a good proxy for risk. If you’re 25-years-old, earning $50,000 a year and you have a bad credit score, you’ve got that because you like taking risks. If you’re 40-years-old, earning $22,000 a year, and you’ve got a bad credit score, it’s because you’re trying to get by on a low income and not because you’re somebody who likes taking risk
Just’s pricing model is based on an advanced in-house telematics model, using high resolution data from more than 12,000 drivers. By combining driver telematics data with contextual information such as driver fatigue, distraction, traffic flow and weather, the firm says it can predict individual driver risk with higher accuracy than those firms using demographics data alone.
“Like traditional auto insurers, we use a demographics element, but we keep it to the absolute bare minimum of things so that just a very small number of variables determine the vast majority of your quote,” Smithson told Insurance Business. “The initiation quote is based on where you live, what car you drive, how old you are, what sex you are, and whether you have any active violations. We don’t ask for highest level of education achieved, if you’re married or have children, because those questions make such a tiny difference to pricing, and we’d rather simplify the process for people.
“Last year, we paid 12,000 people to drive for us for about four months so we could collect high resolution telematics data to build a pricing model. One thing we discovered, which I think is very interesting, is that while many existing telematics products looked only at whether you were speeding or going a certain amount above the speed limit, we found there was no meaningful correlation between people who sped from time to time, and people who had accidents. The reason a driver might not speed is because the roads they travel on most days are busy, and so they have no chance to speed.”
Rather than focusing on speed, the Just solution looks at how drivers change their driving habits according to the conditions. The theory is that somebody who drives at 80 miles-per-hour on a freeway when it’s empty and the conditions are great, and then 50 miles-per-hour when the conditions are bad, it’s raining and the road is congested – they’re probably a good driver because they’re changing how they drive according to the conditions. On the other hand, somebody who drives at 50-miles-per-hour all the time, even though they might never be breaking the speed limit, is more likely to have an accident, according to Smithson.
Just offers a 30-day policy term, during which drivers will pay $X per mile. For example, a driver might pay an initial rate of eight cents per mile for 30 days. Once that policy term is over, the firm will offer a new policy with a new rate, which will reflect how the customer drove in the prior policy term. The aim is to provide safe drivers with a lower premium, thus helping consumers to lower their auto insurance pricing while also becoming better drivers. Through the Just app, drivers will also have access to real-time driving feedback, which the firm hopes will also encourage safer driving.
“State insurance departments tend not to like the idea of premiums changing. They like people to have visibility on what they owe. Lots of auto insurers have solved this problem by offering customers a base rate, and then if they drive well, they give them a discount,” said Smithson. “We don’t offer discount like that. By adjusting our premium per month, we’re able to have a much wider range of prices for people. Really good drivers might be paying as little as two or three cents per mile, whereas really bad drivers – and we saw some really bad drivers in our BETA program – could well be paying upwards of 70 cents per mile. It’s simple. If you drive well, you’ll see that reflected the next month in your premium.”
Just’s telematics-based offering officially launched in Arizona on March 24, 2020. The firm plans to launch in several more southwestern states, including New Mexico, Texas, Colorado and Utah, at the beginning of 2021. Smithson added: “We know auto insurance is an industry where it’s very important to have agency distribution, so we’re also planning to develop an agent channel in time.”