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2026-03-10T13:35:57Z

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🚗 '''Pay-per-mile insurance''' is a usage-based [[Definition:Auto insurance | auto insurance]] model that charges [[Definition:Policyholder | policyholders]] a variable [[Definition:Premium | premium]] calculated primarily on the number of miles driven, rather than relying solely on traditional rating factors like age, credit score, and zip code. Typically structured as a low fixed monthly base rate plus a per-mile charge, this product appeals to low-mileage drivers who feel overcharged by conventional policies that spread costs across average driving assumptions.

📱 The model depends on [[Definition:Telematics | telematics]] technology to capture accurate mileage data. Policyholders plug a small device into their vehicle's OBD-II port or use a mobile app paired with the car's systems, and the [[Definition:Insurance carrier | insurer]] receives periodic odometer readings or GPS-based distance calculations. Some carriers also incorporate driving behavior data — hard braking, time of day, speed patterns — to further refine pricing, blending pay-per-mile with broader [[Definition:Usage-based insurance (UBI) | usage-based insurance]] principles. [[Definition:Underwriting | Underwriting]] still accounts for standard variables, but mileage becomes the dominant swing factor, meaning a driver who parks the car for a month pays substantially less than one who commutes daily. The per-mile rate itself is set during [[Definition:Policy | policy]] issuance based on the driver's risk profile.

💰 From a market perspective, pay-per-mile insurance addresses a fairness argument that resonates strongly with urban dwellers, remote workers, and multi-car households where one vehicle sits idle most of the time. Carriers benefit from [[Definition:Adverse selection | adverse selection]] working in their favor — low-mileage drivers tend to file fewer [[Definition:Claim | claims]] — which can produce favorable [[Definition:Loss ratio | loss ratios]] for this segment. The model also aligns financial incentives with reduced driving, giving it appeal among regulators and policymakers focused on emissions and congestion. Companies like Metromile (now part of Lemonade) pioneered the space, and major incumbents have since launched their own per-mile products, signaling that usage-sensitive pricing is becoming a permanent feature of the [[Definition:Personal lines | personal lines]] landscape.

'''Related concepts'''
{{Div col|colwidth=20em}}
* [[Definition:Usage-based insurance (UBI)]]
* [[Definition:Telematics]]
* [[Definition:Auto insurance]]
* [[Definition:Personal lines]]
* [[Definition:Behavior-based pricing]]
* [[Definition:Insurtech]]
{{Div col end}}

Definition:Pay-per-mile insurance - Revision history

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