How Root (actually) prices car insurance

First, the bad news.

Here's how traditional insurance works. (We'll make this as painless as possible.)

Basically, when you shop for car insurance the traditional way, you have to answer a ton of questions. You know the drill. Page after page of questions about your marital status, location, gender, history, etc.

There's a purpose to all those questions: once you've given them all your information, insurance companies put all your answers into an algorithm. Then they use the algorithm to put you into a category called a "risk pool."

And whatever price is assigned to that risk pool is the price you're getting. Your price is based completely on your category.

Need an example? Take a look.

BMV history is the #1 factor in a traditional car insurance rate

Yep. It's largely a demographics game.

The number one factor here is your driving record. Fair enough. But then we have credit score, age, and marital status—all things that don't necessarily say anything about your driving ability. (Do all single, 30 year old males in Franklin County drive the same? We think not.)

Notice anything missing? We did.

Here’s where things get good.

We'll just be bold and put it out there. Here's our pricing algorithm.

Driving score is the #1 factor in Root pricing

We admit: in some ways, these graphs look similar. But take a look at the number one factor in our pricing model. That's the game-changer.

The single largest factor in Root's pricing structure is your driving.

When you take a test drive with the Root app, it captures data about how you drive. From that data, we calculate your individual driving score. And that driving score is the single largest component in the price Root quotes you.

Did you get that? Your driving is the single largest factor in your Root quote. That's a big deal.

Now, do we also consider other factors? Sure. We use several standard factors that are mathematically predictive of risk or fraud. At this point, it would be irresponsible for us to ignore them (although we're committed to eliminating as many factors as we can as technology progresses and artificial intelligence gets smarter).

But, by pricing primarily based on your driving, we are inviting you to prove the number guys wrong, to show us with your driving score that you're better than your category.

We want you to drive for yourself.

And we didn't stop there.

Here's what saves you the most $$$.

You probably already know that Root doesn't insure bad drivers—but you might not know just how much money that's saving you.

Why? Most of the car crashes are caused by a small minority of bad drivers. We're talking the people who cut you off in traffic, swerve into and out of lanes, and tailgate you all the way to work. These are the drivers who cause most of the losses to an insurance company.

Don't believe us? Watch this.

The worst 30% of drivers cause nearly 45% of all accident costs.[1] Or, put another way, the bottom tier of bad drivers cause more than their fair share of costs associated with accidents.

That's actually a big percentage gap. And, if you're a good driver, you're probably wondering how much these statistics are costing you. The answer? A lot. Some of our Root members have told us that their previous insurance rate was about twice as much as what they're paying with us. And that's largely because they were paying for accidents caused by bad drivers.

While the old system works just fine for traditional insurance companies, we didn't think it was either fair or acceptable in the 21st century.

So we're changing it up.

We don't insure high-risk drivers. At all. And that decreases the accidents we have to pay for by nearly 45%.

As the video shows, when we remove the worst 30% of drivers from the equation entirely, fewer accidents occur, and we pay out less.

That saves us a lot of money. And we pass those savings right along to good drivers. That's why, if you're a decent driver insured with Root, you're probably paying a lot less for your car insurance.

That's why we get reviews like these:

There you have it. The secrets to an insurance revolution. Do with them what you will. (Although we humbly recommend downloading the Root app, taking a test drive, and getting in on the savings yourselves. 😎)

  1. PGR Ohio Insurance Filings, March 2018 ↩︎

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