Insurers to get mileage-based coverage

By
Published:

16A change in the auto industry is about to happen – credit goes to Chris Gay from the auto insurance industry.  The MileMeter was launched in 2008 and this was the only company that offered the pay-by-mile auto insurance without the use of the vehicle tracking devices.  Based in Texas, this is an online-only company which is licensed to provide insurance but has expansion plans where it would move to other states as well and have more options.

Gay chanced upon this idea after having a bad insurance experience when he was hit by another car in 2004.  He has named MileMeter the ‘anti-insurance insurance company.’  Here the clients pay for 6,000 miles upfront and can make additions online if needed.  Here the rates are calculated on the basis of the odometer photos, age proof, location, vehicle type and model etc.  This information is supplied by the customer and the rates are calculated accordingly and the credit scores or the driving habits of the motorist don’t really matter.

The logic is that the companies can afford to offer lower premiums as these drivers are low risk since they are seldom on the road.  This scheme is ideally suited for retired people as well as college going students or those that use other modes of mass transit options and still need the car for weekends, or the business traveler who is always on the move, or family members who use the extra car only on occasions.  As per rough estimates, at least 2/3rd of the population would be paying $270 per car per annum under this program.

These mileage-based insurance schemes are gaining momentum slowly but steadily since the last decade.  However, recently there are others who have started making these offers where one will have to pay-as-you-drive, is gaining popularity.  These policies are now being offered in at least 35 states by American Family, Progressive, as well as GMAC insurance.  This is an accurate step in getting a more accurate picture of the risk as well the usage pattern.

The software code for MileMeter was written by Gay, a software analyst, in the year 2004.  The seed capital of $260,000 was also raised by him and it won the approval from Texas regulatory.

Due to a financial crisis Gay almost shut down the company but was saved in the nick of time when he received a call stating that he had won the Amazon.com’s start-up contest which helped fetch him $7.65 million from Compass Global Fund.