Personal insurance is designed to cover non-commercial use. If you, your friends and family are the only ones using your property, the risk is lower than if a bunch of strangers come and go. If you’re driving your car alone, the risk is lower than if you’re transporting a passenger. As a result, personal lines are cheaper.
Uber and Airbnb had been relying on personal insurance to cover damage and liability with their products. That clearly wasn’t going to be sustainable. So legislation was passed to make commercial liability insurance mandatory in some cases.
But that created another problem: it screwed drivers for Uber and Lyft. Auto insurance is rated in part based on the number of miles you drive. Uber driving was raising that number, even though that driving was not insured. It was fundamentally unfair in the other direction.
I suggested a few months ago that drivers will be able to back out the mileage that they are “on the clock,” when the insurer wasn’t actually providing insurance.
Now, Uber has partnered with Metromile to do just that. This is a great example of an insurer designing a product to fit the new economy. Metromile’s original product (I’m a customer) had already improved the status quo. It uses a dongle that plugs into your car’s OBD-II port to talk with the network and your phone. Because of that, it can tell you each trip you took, how far you drove, approximately how much you spent on gas, etc. Metromile goes even further: it can tell you where you parked your car and whether street sweepers are going to come by and hit you with a $75 fee.
This is a move that makes sense for anyone who does serious mileage on Uber. I’d expect other insurers to follow with similar models, though that will likely take months (if not longer).
The insurance industry can get creative when it needs to be. If insurers can come up with a policy for trained bears (value: $250,000) in Hollywood, they can certainly insure the new economy.