Auto Insurance That Looks Like a Prepaid Phone Card

Robert Smithson started the conversation with a special interview hat, a top hat, which he conceded is not comfortable. Gilad’s reasoning for keeping it in the recording is that the industry needs more humanity: insurance leaders are people, and sometimes hat people.

About Robert Smithson

Robert Smithson is CEO and founder of JUST Insurance, an auto insurer built around telematics and a prepaid, 30-day model. Before insurance he worked in sports betting, where he built a company that produced real-time pricing of sporting events.

Why “JUST”

The company was in the process of rebranding as JUST Insure, partly because its domain is justinsure.com, and partly because a California agency with poor reviews, Just Auto Insurance, kept appearing in searches. The name is a mission statement: according to the dictionary, “just” means fair, moral and right, and the goal is to build an insurance company that behaves that way, by measuring risk directly rather than measuring things that correlate on average with risk. Robert doesn’t claim to be the only one doing this or the best.

He shared a domain anecdote: just.com is held by a squatter who, when Robert reached out, said he had an offer of $1 billion and had countered with $20 billion. Robert advised taking the billion, since the record for a domain sale is around $150 million, and noted he is still sitting on it.

From Sports Betting to Auto Insurance

Robert explained the connection. Sports betting and insurance are both about probability: what is the probability this team scores, or this person has an accident. In the old days, a bookmaker set a line before the match. Smartphones and streaming brought betting in real time, so his company built algorithms for real-time pricing. In the same way, the mobile phone made it possible to track driving in real time, and the question was how to do the same with insurance.

Professional bettors, he noted, build algorithmic models that price better than the betting companies, while no one has built a business around roulette because there is no informational edge.

What Predicts Accidents

Robert’s view is that most of what telematics models are built around today isn’t predictive. Harsh braking, for example, tells you little, and may just mean your brakes don’t work well. The most predictive signals are where and when you drive: driving home from a bar at two in the morning versus taking children to school at two in the afternoon, or driving home from sports stadiums at night. He mentioned other experiments, like analyzing how early a driver slows for a traffic signal, which he suspects is mildly predictive, and signs of impaired driving, such as slowing unreasonably early.

He believes the interesting thing about telematics is not pricing someone two dollars better a month, but changing behavior so a driver is 20 to 30 percent less likely to have an accident, which reduces the cost of insurance.

The Prepaid Model

Robert named good next-generation telematics from other companies, including Motion Auto and a few others, plus some good driving behavior work at Root, and dismissed much of the rest as old products built on just a few metrics of safe driving. What is unique about JUST, he said, isn’t the telematics model, though he thinks it’s great. It is that JUST reimagined auto insurance around telematics. Instead of a six- or 12-month contract, it looks like a prepaid phone card: you sign up in under a minute, put money in the account, and the balance goes down as you drive.

The price is good for 30 days and then changes, up or down, under a 30-day non-renewing contract. Robert contrasted this with other usage-based products that give a discount for driving well, which he called a poor consumer proposition that doesn’t let you do the one thing you should: identify the 20 percent of customers significantly more likely than their demographic to have an accident, and let them go. He added that no one is denied coverage: a bad driver can get a price, but it will be high, and JUST is aiming at people who want a flexible, per-mile product and have good driving habits.

Regulation

Every algorithm change must be filed with regulators, which can take months, so JUST introduces things more slowly than it would like. The 30-day model, however, lets it change the price more often within filed algorithms.

Where and Who

JUST sells in Arizona, with plans to launch in three to four more states that year; Robert was signing forms the previous Monday for Georgia and Ohio. Texas would come later because it is big, and he named Utah and Colorado as likely next. Telematics players tend to pick similar states: you don’t launch in tiny states with no market, because the regulatory effort is the same as in Texas; you avoid very litigious states such as Nevada, and want telematics-friendly ones.

On competition, he argued that consumers don’t care about telematics. They care about flexibility, ease of use and cost, and he thinks the segment that benefits most from telematics pricing is lower-income consumers, rather than a household like Gilad’s with two cars driving 5,000 miles each, which is the target of Metromile and similar products.

JUST originally planned to distribute through used car dealerships, because instant insurance matters when someone buys a car. But most cars are financed, which requires full coverage, so JUST only recently launched full coverage to start moving that channel. Half of its customers come organically or via referrals, which he sees as an encouraging sign for a product no one else has.

Instant Insurance for Other Markets

Robert sees other niches for instant, telematics-based cover. Peer-to-peer car rental platforms pay large amounts to insure rented cars: one company with $4 million in revenue was spending $1.2 million on insurance, and is interested in moving that cost to consumers at a fairer, behavior-based price. Telematics lets an owner rent a high-performance car only to safe drivers. He also described gifting auto insurance credit to a nephew, or a corporate debit-card model for employees, and the absurdity of rental counter insurance at $30 a day, a high-margin product he could undercut.

On automakers offering insurance, he said good for them: they have enormous data, but he thinks they’d be weaker on where accidents happen. His customers aren’t buying new cars from franchise dealers; they buy from independent lots and don’t have Apple CarPlay. In his words, they use tape decks.

Advice: A War in the Pacific, and Don’t Get a Dog

For his recommendation, Robert chose Ian Toll’s trilogy about the war in the Pacific, which took him about two months. His life hack, in jest: don’t get a dog. Gilad’s question about the chess app turned out to be Chess.com.

Key Takeaways

• JUST is built around telematics as a product, not a discount: a prepaid balance that drops as you drive, with a price that resets every 30 days.
• Robert’s thesis is to find and price the riskiest drivers properly rather than reward the best with discounts.
• The most predictive signals he sees are where and when you drive, not harsh braking.
• Every algorithm change is filed with regulators, so he launches in telematics-friendly states and expands slowly.
• Lower-income consumers are the segment that benefits most from telematics pricing.
• Peer-to-peer rental platforms and rental counters are other niches where instant, per-use cover fits.
• Half of JUST’s customers arrive through organic search or referral.