Metromile Raises $192 Million to Take on Car Insurance Business
Novel approach lets drivers buy coverage by the mile
Investors put $1 billion into insurance startups in first half
Fueled with $191.5 million from billionaire Mark Cuban and other investors, Metromile Inc. is now poised to complete its journey as a full-service car insurance company.
The startup Wednesday said it had acquired Mosaic Insurance Inc. -- a $22 million purchase that includes Mosaic’s licenses in 50 states. This means Metromile will handle the entire underwriting and claims management process in-house and can abandon partnerships struck with other insurance companies purely for their licenses.
The cash -- which was raised over a series of three equity rounds during the past few years but never before disclosed -- will also be used to expand Metromile across the U.S. and build its brand in an increasingly competitive space.
The San Francisco-based company is one of more than six dozen insurance tech startups to emerge in recent years with venture backing and a mission: disrupt old-guard insurance companies with technology that makes underwriting more efficient and, in theory, slices costs to consumers.
From traditional venture capital firms like Andreessen Horowitz and strategic ones like MassMutual Ventures, investors have put a record amount into the sector. Insurance startups secured $2.7 billion last year and about $1 billion during the first half of this year, according to research firm CB Insights.
Although CoverHound Inc., Insurance Zebra Inc. and Insurify Inc. are among a dozen or so insurance startups focusing on vehicles, they all function like travel website Kayak, by providing a platform for consumers to compare multiple car insurance quotes at once. Metromile’s closest competitor, London-based Cuvva, offers pay-by-the-hour insurance.
Metromile typically charges a flat fee of $35 a month and then $0.05 per mile, although those fees vary based on location, years driving and other factors.
When subscribers sign up for the service they get a hardware dongle that plugs into their car’s diagnostic port. Through the dongle, Metromile tracks how many miles the subscriber drives and, if the subscriber chooses, delivers other information, like maintenance and where the vehicle is parked.
Metromile Chief Executive Officer Dan Preston said although the dongle could track driving habits, it doesn’t because such actions are a poor proxy for determining risk.
“About 70 percent of the risk variance is explained in mileage alone,” he said. “If a driver slams on his brakes suddenly to avoid rear-ending someone, that’s not fair. They can’t control that.”
Preston declined to share revenue, valuation or subscriber numbers for the five-year-old company that began offering insurance in late 2012.
Along with Cuban and Metromile founder and Chairman David Friedberg, Canadian insurance giant Intact Financial Corp. and China Pacific Insurance Group Co. also invested alongside venture firms including Index Ventures, New Enterprise Associates and First Round Capital, in the three previously undisclosed rounds, bringing total funding to $205.5 million.