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October 6, 2017

How Root prices car insurance fairly

You might already know we offer a different kind of car insurance experience—based entirely within our app—and that good drivers could save hundreds annually. But how does Root Insurance pricing work differently, too? 

Two charts comparing a traditional car insurance pricing model to Root’s pricing model

Car insurance pricing the traditional way

Traditional car insurance rates are largely based on demographics. 

When you shop for traditional car insurance, you have to answer a lot of questions about your marital status, gender, credit history, and more.

Once they’ve received all your information, car insurance companies put your answers into an algorithm. They use this algorithm to place you into a category called a risk pool. 

Whatever price is assigned to that risk pool is the price you get. Your monthly rate is based entirely on whatever category you’re boxed into.

The main determining factor is your driving record, which makes sense. But next, insurance companies assess your credit score, age, and marital status—things that don't necessarily say anything about your driving ability. For example: Do all single, 30-year-old men in a specific ZIP code drive the same? 

We know the answer to that question is no, because we base a person’s rates primarily on how that person actually drives.

Good drivers can lower their car insurance cost

At Root, the No.1 factor in determining your rate is your test drive score.

When you take the test drive, our Root app measures your day-to-day driving behaviors. From that data, we calculate your individual driving score. This score is the main factor that decides your Root car insurance rate. 

We consider other factors as well—we use several standard factors that are mathematically predictive of risk or fraud. Ignoring these other factors would be irresponsible, but we’re committed to keeping Root car insurance rates fair by basing your rate primarily on your driving.

In fact, as part of our efforts to reduce insurance bias, we’ve never used common industry factors like education or occupation in our pricing, and we’re committed to dropping credit score from our rates entirely by 2025—it already plays a relatively small role in our models compared to industry averages.

The best pricing model for the best drivers

We only insure good drivers. And by eliminating the other drivers—the people who cut you off in traffic, swerve through lanes, and tailgate—we save a lot on claims. Those savings get passed to you, which can lead to lower car insurance rates.

The worst 30% of drivers are responsible for nearly 45% of all accident costs. In other words, the bottom tier of bad drivers are responsible for the bulk of expenses associated with accidents. That’s why traditional car insurance pricing can be so expensive.

We don’t insure high-risk drivers, and that decreases the accidents we have to pay for by almost 45%. When we remove the worst 30% of drivers from the equation, fewer accidents occur, and we pay out less. 

So, if you're a good driver insured with Root, your average car insurance cost per month is probably a lot less. Some Root customers have told us their previous car insurance rates were almost twice as much as what they're paying with us for the same type of coverage. That's largely because they were paying for accidents caused by bad drivers.

You are much more than a demographic. Let your driving earn you the rate you deserve.

Find out today how Root Insurance + your good driving could save you hundreds per year on your car insurance.

¹ PGR Ohio Insurance Filings, March 2018 ↩︎

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Columbus, OH 43215

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