It’s been a breakout year for Metromile. The technology-based insurance startup, which employs the disruptive tactic of allowing customers to pay for coverage based on the amount of driving they do, attracted a surge of interest during the pandemic. As consumers drove less, it made sense they would want to buy only as much insurance as they actually needed.

Chamath Palihapitiya and Mark Cuban spearheaded a $160 million investment into the San Francisco-based company in November. On the heels of that move, the company was taken public via a SPAC merger, which closed in February. Founded in 2011 and led by CEO Dan Preston, the insurer now has a market capitalization of about $1.2 billion — though it has yet to turn a profit. 

Adding to its buzz, Metromile also jumped on the crypto bandwagon this year. The company said in May it would purchase $10 million worth of Bitcoin and allow for premiums and claims to be paid with cryptocurrency.

The road ahead for the insurer could be bumpy, though, if COVID-era shifts in driving patterns don’t take hold permanently.  In that event, an anticipated increase in demand for Metromile’s offerings might not materialize. The coverage is considered a decent value for customers who drive less than 12,000 miles per year. Before the pandemic, the average American drove about 13,500 miles per year, according to U.S. transportation officials.

Cryptocurrency’s recent market crash, and negative attention surrounding bitcoin’s electricity consumption, also threw a curve ball for the company, although it still appears committed to crypto for the long haul. We caught up with the director of communications for Metromile, Rick Chen, and he offered some additional perspective on the insurer’s state of affairs.

This interview has been edited for length and clarity. 

Business of Business: How has the pandemic impacted Metromile, and how does that differ from the impact on traditional insurers?

Rick Chen: Metromile benefited from increased interest in pay-per-mile and more flexible auto insurance options. Our customers decreased miles driven by 58% in the month after March 19, 2020, and earned additional average savings of approximately 30 percent off. As a result, many customers told their friends and family about Metromile, and we benefited from increased word of mouth and organic searches for our pay-per-mile or pay-as-you-go insurance model.

As the COVID-19 pandemic continued, pay-per-mile auto insurance became increasingly mainstream. The demand for fairer auto insurance increased and expanded our total addressable market. Before the pandemic, more than half of U.S. drivers drove fewer than 12,000 miles per year, considered low-mileage in the industry, and as remote or flexible work schedules and other lifestyle changes become permanent; we expect there to be more low-mileage drivers who could benefit from Metromile.

Loss ratio [ratio of claims paid to premiums earned] did tumble pretty far over the past year, but how much of that was related to fewer people being on the roads in general? Do you expect that figure to rise again as commutes and other activities resume? 

As an insurance company, we have always eschewed a growth-at-all-costs strategy and instead focused on profitable unit economics. Metromile has consistently posted low loss ratios because of advantages from our per-mile and behavioral pricing, as well as our AI that allows us to discover three times more fraud than industry incumbents. We expect to end 2021 with an accident year loss ratio between 65 percent and 70 percent.

For context, from Q2 2020 to Q4 2020, nationwide driving dropped approximately 30 percent year-over-year. Despite the decline in our premiums, our loss ratio remained on target in 2020.

[Note: Loss ratios are typically around 50 percent to 80 percent across the auto insurance industry, and dropped to an average of 47.3 percent midway through 2020, according to S&P Global. Metromile’s loss ratio was 75.7 percent in 2019 and 57.4 percent in 2020.]

People have talked about permanent shifts post-pandemic, including in terms of fewer people commuting regularly to the office. This sounds like good news for Metromile. How is the company positioning itself to grow its business, and converting more of these drivers into customers? What are the main obstacles to policyholder growth and how is the company seeking to tackle them? 

We believe a “K-shaped” recovery is emerging and a bifurcation of driving and mobility is the new “normal.” Notably, the number of miles driven has reached or surpassed pre-pandemic levels in March and April 2021, but driving patterns have changed. Increasingly, drivers are replacing risky morning commutes and late-night driving with safer mid-day and weekend driving.

We believe Metromile is a highly individualized product with widening appeal. Before the COVID-19 pandemic, 65 percent of U.S. drivers could benefit from pay-per-mile auto insurance, and with 56 percent of U.S. companies planning to adopt a hybrid or remote workweek and car alternatives becoming more popular, we expect this to increase. To meet the demand, we plan to expand nationwide beginning the second half of 2021 to provide coverage nationwide by the end of 2022.

How has the SPAC deal and going public affected Metromile? Having support from Chamath Palihapitiya and Mark Cuban also must have had impacts for the company -- what did that do for the business? 

We believe our Nasdaq listing demonstrates pay-per-mile auto insurance is mainstream; it also validated our disciplined approach to growth. We don’t think companies need to make a tradeoff between providing meaningful customer value and building a healthy, profitable business. 

Our SPAC sponsors and long-term investors like Mark Cuban understand and endorse our approach. The SPAC gave us more opportunities to grow our team, benefit from industry expert sponsors who have deep insurance and operational experience, and fully capitalize our business for growth into the future.

How long do you think it will be before Metromile is profitable? How much of a disruptive impact do you think it will ultimately have on the auto insurance space? 

Metromile has achieved scalable profitability. We earned positive unit economics after posting a positive contribution margin in Q1 2019. We aim to achieve operating profitability in 2022 and self-sustaining growth by the end of 2023.

The COVID-19 pandemic forced many industries to provide consumers with more digital and flexible options, and auto insurance is no different. We plan to scale our digital insurance platform to provide more personalized choices. For example, we recently announced a partnership with Hippo to offer a multi-policy discount on auto and home insurance when purchased together. This is the first time consumers can bundle auto and home coverage to save money from two different insurance companies.

Is the company still committed to bitcoin and crypto despite the market crash and environmental impact concerns that were raised lately? Has it made any changes to its policies in that regard? 

We believe insurance can play a role in supporting the environment. It’s why we want to drive the adoption of pay-per-mile auto insurance and an experience that rewards less and safer driving. Bitcoin’s impact on climate was something we considered. Over the last few years, renewable energy has become more affordable and widely adopted for mining. We expect this trend to continue decentralized finance is carbon neutral.

Metromile is firmly committed to providing drivers with more options and flexibility. We believe bitcoin and decentralized finance are key to our commitment and look forward to providing our policyholders the ability to pay and be paid in bitcoin soon. In short, bitcoin is a starting point for us. Not all cryptocurrencies have the same carbon emission impact, and we’ll continue to evolve as tech gets better.