InsurTech Metromile plans for life as public company

Metromile CEO Dan Preston is targeting an initial public offering (IPO) as the company looks to diversify its capital base, The Insurance Insider can reveal.

In an interview at InsureTech Connect (ITC) in Las Vegas, Preston said an IPO “is definitely in our future”.

The timescale is currently vague, but the Metromile CEO confirmed that the company was aiming at going public in the next “couple of years”.  

“We don’t want to rush it,” he noted. “We will be very deliberate about it”.

Metromile sells car insurance based on mileage driven, giving low-mileage drivers better rates. It uses telematics and mobile software to price risk and help drivers with extra services, such as helping them find parking or providing information about street cleaning times.  

It has raised $293mn in funding since 2011.

The carrier is on track to write around $100mn in premiums in 2019, financial filings indicate. In the first half of 2019, the company wrote $52mn in direct written premiums.

In the US, Metromile has built a full-stack insurer. However, Preston has no plans to replicate the model internationally, preferring instead to market the InsurTech’s telematics software to auto carriers worldwide.  

Metromile has also secured its first software client: investor Tokio Marine Holdings. The San Francisco-based company has a team of around 20 working on licensing its technology to insurers and around the world.  

Preston is sceptical about the way many technology investors have approached InsurTech. 

“Tech investors look at cost of acquisition for success” in a bid to rapidly grow revenues, he said. “Insurance doesn't really work that way. I could cut my prices by 90 percent and my cost per customer acquisition would plunge because I’d be giving away [almost] free insurance.”

Preston is adamant that the only “sustainable” way to scale an insurer is through profitable underwriting.

He noted that, in some of the states it writes business, Metromile runs loss ratios in the 60th percentile.

However, Preston was unapologetic about the fact the company will not run a combined ratio of 100 percent or less any time soon, because it will continue to invest in its telematics business. Like most technology start-ups, Metromile runs at an underwriting loss.  

The carrier buys a reinsurance treaty led by Hudson Structured Capital Management, the fund behind a blizzard of recent InsurTech investments, including Kin Insurance and RiskGenius.

He said Hudson had helped the company create a “new form of reinsurance product” that was conducive to capital efficiency and scalable growth.  

Like Lemonade, Metromile has taken the approach of getting a small number of state licenses over time, rather than writing business nationwide.

Metromile is currently active in eight states including California, but Preston expects to set up shop in many more over the next 18 months.

Preston joked that Metromile, founded in 2011, is now the “OG InsurTech,” a West Coast hip-hop acronym for “original gangster”.

Having spoken at the first ITC conference in Las Vegas in 2016, Preston, is seen as a veteran of the sector. He graduated from Brandeis University in 2007 and co-founded his first start-up, AisleBuyer, while at graduate school at Stanford in the 2010s.  

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