Just isn't the first auto insurance company to adjust rates based on driving (anyone with a television is probably sick to death of listening to Progressive hawk their "safe driver discount"), but they are the first to combine the idea with a pay-per-mile formula.
It's an interesting idea, and one that appears to be catching on: The company announced late last month a new raise of $8 million co-led by Crosscut Ventures, ManchesterStory and Western Technology Investments. (That's on top of the $15 million they've raised to date.)
The new funds will help them expand into new areas and develop features aimed at improving driver safety and reducing the likelihood of accidents.
"If you don't drive that much, if flexibility matters to you, or if you are a safe driver, we will save you an enormous amount of money," said Just founder and CEO Robert Smithson.
Beyond Race - and Gender-Based Proxies
Smithson says the company, which is testing its app only in the state of Arizona for now, has more than 5,000 drivers signed up for insurance. Some on their minimum liability plan are paying $10 or less every month for car insurance — as little as 3 cents per mile.
For full coverage, Smithson says, the cheapest rates are around $20 per month. For comparison, the average cost of minimum liability coverage for men in Phoenix, Arizona comes out to $55 per month. For women it's $59 per month.
That men and women pay different rates for car insurance is exactly the kind of esoteric actuarial voodoo that Just is trying to offset. Car insurance underwriting has historically relied on things like zip code, income, education, race and gender as proxies for risk.
But according to Smithson, this is an outdated and unnecessarily convoluted — not to mention prejudiced — way of thinking, thanks to the smartphones in our pockets, which are capable of monitoring our driving.
"The reality is we now know how people actually drive," he said. "There's no reason to use proxies for risk anymore, we can use actual risk. We can assess, do you like to do 65 in a 35 zone? Do you like to drive home from bars at 3am all over the road? Do you stop at stop signs?"
Unfortunately, not everyone is a good driver, and some people just aren't cut out for Just's model.
"The very worst driver who we've ever seen managed to see her price rise to 71 cents per mile," said Smithson. "How on Earth do you get 71 cents per mile? The answer is by driving back from bars 3 nights a week and not paying attention to speed limits or stop signs. She was only with us for about 28 days before she decided another insurance company would be cheaper. And it is! She should not be with us. She should be with someone that doesn't check her driving."
In addition to how well you drive, the Just app monitors how much you drive, where you drive and what time you're driving to calculate your insurance cost. Rates are adjusted at the end of every month — a practice that differentiates Just from many of its competitors, such as Root and Metromile.
This continuous rate adjustment, Smithson says, is what gives Just a leg up on other companies that only change the payment structure once per year. Not only do safe drivers see immediate benefits, people who aren't a good fit for Just's model (because they're unsafe or they drive a lot) quickly leave the service.
"If you're a bad driver, it's cheaper to do it with someone else," said Smithson. This translates to a more efficient underwriting model: Techcrunch reported last week that Just's direct loss ratio was 65.8% year to date while Root's was 82% for 2020.
A screenshot of Just Auto's "ScoreSafe" dashboard
Investing in Driving Data
With all this data pouring in on driver behavior, Just is planning to use much of the new funding to expand its data science department.
"We see accidents happen," said Smithson. "We want to look at our data and rewind. Why did that happen? Are any other people in our customer base doing whatever caused that accident? And if so, can we tell them not to?"
The idea is ultimately to create a system that recommends new behaviors to drivers to improve their driving and save them money. One push notification could prompt users to leave 10 minutes later for work to reduce the amount of traffic during their commute. Another could let drivers know a certain intersection is particularly dangerous and suggest an alternative route.
The app might propose calling an Uber rather than risk a late-night drive home from the bars. Smithson says they're not planning to create a navigation app to guide users along the safest and cheapest route, but they're not completely ruling it out either.
As hyperbolic as that may sound, there's good reason to believe their strategy of incentivizing safe driving with discounted insurance might actually make roads safer, too.
"Considerable research indicates that motorists respond to financial incentives," said Todd Litman, founder and executive director of the Victoria Transport Policy Institute, a transportation-focused think tank. "Using standard price elasticity values, we predict that distance-based vehicle insurance is likely to reduce affected motorists' annual mileage by about 5-15%."
Additionally, Litman says, because these pricing schemes especially incentivize the highest risk drivers to drive less, a reduction of 5-15% should equate to even more than 5-15% fewer crashes. Just's own data paints a similar picture: The company reports that their customers have accidents that cause injuries at a rate of 2.2 per 100 policy years, which is 15% lower than the industry average.
As the company expands outside of Arizona, it will have to overcome the patchwork regulatory landscape that determines insurance laws in each state. In California, for instance, Prop 103 limits the factors you can use to set auto insurance rates, making apps like Just illegal — a real stroke of irony for a company headquartered in L.A.
Smithson says there are maybe five other states that have similar laws that will prevent Just from ever being welcomed by regulators.
"It comes from the best intentions. It's not like the California regulators are trying to be a pain. It's just that it's got so complicated that our product would be illegal in California," he said. "I want to bang on every regulator in the United States and say 'We can use insurance to save lives'."
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Microchips and semiconductors have established vital roles in everyday devices. While laptops, phones and other mobile devices might be the first things to come to mind, transportation—in particular cars—takes a sizable portion of the demand.
Infineon is a significant semiconductor supplier to the automotive and transportation industry, in particular to the Volkswagen Group, which is beginning to deliver on its promises of many electric vehicle launches throughout the decade. Infineon has more than 50 of its semiconductors in the VW ID.4, a compact electric SUV that went on sale in the U.S. earlier this year. It also supplies semiconductors to Electrify America, an EV charging company owned by VW Group of America.
VW's push has come in a year when a global microchip shortage caused by production curtailing in last year's onset of the Covid-19 pandemic. Automakers, in particular, have scrambled to continue building new cars. Dealership lots across the country are running out of inventory and used car prices remain high. At the same time, President Biden has called for a massive increase in electric, hybrid and fuel cell vehicles production. He aims to have half of all vehicles sold by 2030 be non-gas powered.
"It's an industry problem," said Shawn Slusser, Infineon senior vice president for marketing and distribution in El Segundo. "The industry overall is in a situation where production and demand are not matched."
A typical car has about $450 worth of power semiconductors to operate features that go from the radio and navigation system to the automatic headlights and windshield wipers, said Slusser. However, that number roughly doubles for EVs when factoring the microchips needed for Infineon's power module to power the car.
The company also supplies semiconductors to Electrify America, an EV charging company owned by VW Group of America. Infineon has more than 50 of its semiconductors in the VW ID.4, a compact electric SUV that went on sale in the U.S. earlier this year.
Auto industry analysis firm IHS Markit predicted in the Wall Street Journal last week that microchip and semiconductor production will allow auto production to get closer to normal by the end of 2022, although some of the problems are likely to stretch into 2023.
And it's a problem that's been brewing long before stay-at-home orders.
"There's a misconception that chips have only been going into EVs recently, but it's been happening since the '80s," IHS Markit analyst Phil Amsrud told dot.LA. "But what it used to be was that there was automotive and everything else. Now there's much more commonality."
Slusser said Infineon has seen demand for semiconductors steadily rising over the last several years. In 2018, the company decided to add capacity with a facility in Austria. But doing so takes between two to three years and billions of dollars — even in a well-functioning climate. And at the time, there were fewer government pushes and mandates to get consumers to buy EVs.
"The timing of how much capacity we need is also dependent on EV adoption," Slusser said. "Is [demand] going to look like a steady incline or a sharp curve?"
Amsrud said EV production may be helped because the semiconductors going into EV power modules don't go into consumer electronics.
"In this case, it may end up being a benefit," he said. "Those are fairly specialized and won't be competing with consumer products or as many markets for the silicon carbide components."
Correction: An earlier version of this post mischaracterized the number of semiconductors in a typical car and the cost of upgrading a semiconductor facility.