Drive less, pay less with insurance innovation

DALLAS — Do you buy more auto insurance then you actually need? It's estimated that millions of Texans do.

A new company says it can save you hundreds by selling insurance by the mile.

"Yeah, we sell insurance," said MileMeter founder Chris Gay, "but we sincerely believe we are making the world a better place in the long run."

The concept is based on a simple question: Why should a driver who puts 15,000 miles a year on his car pay the same rate as someone who drives 4,000 miles?

"Insurance costs a lot of money because the insurance industry — gosh what's a nice way to put it?" Gay asked.

The short answer is: because it can.

But after six years of work and miles of plowing through government red tape, Gay's company just began offering insurance-by-the-mile, and it's only happening in Texas.

Mileage-based insurance can be a real deal for people who drive less, and are therefore less likely to get in a costly accident. Drivers like Tyler Pharr in Dallas.

"Time spent in your car is just wasted time," he said. "It will take years off your life."

Pharr is a new MileMeter customer who often works from home and shares rides with friends and neighbors. "I'll probably end up saving 2 or 300 bucks this year," he said.

Pharr is (or was) the most profitable kind of customer for a big insurance company.

"The quickest way to make someone change is to take away what they thought they were entitled to," Gay said. He hopes, in the process of making a profit, that MileMeter will force the big insurance companies to change.

That's exactly what Patrick Butler envisioned more than 25 years ago. He's been lobbying state governments around the country to help low-mileage drivers. Texas acted first, hoping to provide more affordable coverage for uninsured drivers.

Until now, Butler says drivers in low-income neighborhoods have paid the highest rates."The insurers look at those zip codes and they raise the prices," he said.

But Chris Gay says insurance-by-the-mile is an idea that's good for both poor and rich — anyone who owns a car they rarely drive.

"Sitting in the garage, barring an act of God, a meteor falling from the sky, you're probably not going to get in an accident and file a claim against your insurer," Butler said.

As a new company in a mature industry, the odds are against MileMeter going the distance. But then again, insurance is a $165 billion industry, so a little success can go a long way.

The trade group for large insurance companies in Texas says MileMeter is a novel idea and it welcomes the competition.

"I think it's unstoppable now," Butler said.

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