Sports betting may seem like an unlikely inspiration for a new usage-based insurance company, but for Just Auto, it provided the a-ha moment.
Just’s model was developed through a partnership between Murray Macdonald, the firm’s co-founder and CTO/COO, and Robert Smithson, co-founder and CEO. Macdonald brought to the table insurance and insurance technology background, while Smithson’s background is in sports betting technology. When they got together to compare the technology used to price auto insurance with what’s done in sports betting, the pair believed the telematics algorithms and systems seemed very simplistic and didn’t do an adequate job pricing risk.
“If you think about how the industry up until now has thought about these risks, it’s more about credit risk than how safe or unsafe drivers are,” Macdonald points out. “Getting to that personalized risk is where we believe there is a lot of value for an insurer, but also from a customer perspective.”
Macdonald and Smithson also recognized that there are many telematics companies, seemingly more than insurers deploying the technology. “It quickly became clear to us that you can’t take telematics and shoehorn that into a traditional insurance product,” Smithson explains. “You need to reinvent what insurance looks like in order to make telematics work. The pair believes drivers should pay for auto insurance not only based on their safe driving record, but a combination of how much they drive and the road conditions, time of day, weather where the trip starts and ends.
Finally, Macdonald and Smithson saw that existing telematics tend to be targeted to either very round drivers or “Robinsons” – well-off drivers capable of helping subsidize the cost of hardware dongles. They realized the group of people who would benefit most from telematics products were lower-income consumers with less-desirable ZIP codes who score lower on their insurance applications, regardless of their driving record.
“We put all those ideas together and came up with Just,” Smithson explains. “It’s called ‘Just’ because we believe it’s fair, moral and right to be charged for insurance according to how safe or risky a driver you are, and not if you have a college degree or live in an expensive zip code.”
To sign up, drivers upload a mobile smartphone app, provide name, mailing address and driver’s license and vehicle information and report any violations. Drivers can then load their account with as little as $30, and get a per-mile price at an introductory rate of about 10 cents a mile that’s good for 30 days of driving. As the balance depletes, drivers must top off their account. At the end of the month, Just gives drivers a new price that not only reflects demographic information, but also looks at how safe the company sees each driver by looking at factors like driving conditions, habits and more. Those who exhibit safe driving habits during safe driving times may see their per-mile rate drop as low as 4 cents, for example, while drivers who drive back from bars in the middle of the night, might see a rate hike.
While Just Auto Insurance is starting with an app, it’s already opening up to get telematics from sources outside the phone. It’s using
Macdonald and Smithson believe that this delivery model has the potential to make a very big difference for many drivers and change insurance industry numbers. Only 1 percent of drivers in Western Europe don’t have car insurance, but in the U.S., that number is more than 13 percent – or more than 35 million cars that aren’t insured. Providing more accessible and affordable, convenient and fair insurance personalized to individual drivers’ habits and actual driving conditions can help lower those numbers.
“We use a combination of underwriting rules and pricing and technology to address all the life scenarios that happen,” Macdonald explains. Just uses a multi-modal approach, where it can accept data in from different sources. Key to getting the data is driver cooperation, which means that insureds must always have their smartphone in the car when they are driving. Just takes periodic odometer photos to track mileage, and the company reserves the right to decline coverage for insureds who don’t allow their driving habits to be tracked.
Just Auto Insurance went live in Arizona in March and has grown in a few months to more than 100 active policies. The company plans to roll out the offering in the south and west and then expand north and east across the country. It is planning to be in the majority of U.S. states within the next five years.
