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Metromile: GEICO 2.0 With SaaS Option Value

Mar. 08, 2021 11:58 AM ETLemonade, Inc. (LMND)26 Comments
Hudson Far West profile picture
Hudson Far West


  • Metromile is an innovative pay-for-usage full-stack car insurance company. Premiums are correlated to how much a person drives.
  • The decade old promise of telematics and data revolutionizing the car insurance industry has stalled. Metromile could be the company that helps bring the industry into the 21st century.
  • Metromile was part of the 'SPAC-craze', including backing by prominent entrepreneurs Chamath Palihapitiya, Mark Cuban and Uber's Ryan Graves.
  • Fundamentally, this is a good company with differentiated products, including a overlooked SaaS offering. Its ability to create a proprietary underwriting model (i.e., better actuary) could be very disruptive.
  • Metromile stock has sold off ~50% from highs. If not acquired, returns should compound, as it expands into more states and establishes its brand as new alternative to large incumbent players, such as State Farm/GEICO and smaller players in a fragmented industry.

What is Metromile?

Metromile was founded in 2011 by tech entrepreneur (and All-In Podcast member) David Friedberg, who continues on as Chairman. The idea behind Metromile is simple: all drivers shouldn't be paying the same car insurance premiums based on static factors that don't incorporate usage. Why should the person who lives in San Francisco who drives 100 miles per month pay the same car insurance premium as someone who lives in Sacramento driving 1,000 miles per month. You don't have to be an actuary to understand the logic, the less someone drives the less probability of an insurance event.

Before we go into this deeper, I want to make a distinction between pay-for-usage (i.e., miles driven) insurance and insurance discounts based on how you drive. Pay-per mile insurance is structured as a base rate plus a per mile rate (see below). Insurance companies, like GEICO or State Farm, giving people a discount on how they drive is a separate and distinct product although both use telematics. The interesting thing about Metromile is it's really tracking both and therefore creating a fundamentally more dynamic underwriting model that only gets smarter as it grows its customer base. The fact that its primary telematics selling point relates to tracking miles is also an easier sell, I believe, for most consumers vs. 'how you drive' assessment purposes. In addition, it is a digitally-native insurer so is attempting to automate as much of the claims process as possible (i.e., taking pictures, getting an estimate, etc.) with the goal of driving more efficiency, which should drive a structural margin advantage vs. incumbents (i.e., physical offices, adjustors).

Metromile is currently offered in 8 states and claims the average customer saves 47% on car insurance. It also has a division called Metromile Enterprise that licenses its technology platform

This article was written by

Hudson Far West profile picture
Why follow Hudson Far West?: Our investments, research and content are informed by businesses that we've created and runDisclaimer: The opinions expressed by Hudson Far West (HFW) in Seeking Alpha are for general informational purposes only and should not be taken as investment advice.

Analyst’s Disclosure: I am/we are long MILE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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