Root Car Insurance
The latest craze going around Facebook and other media outlets – Root Car Insurance. The concept is fairly simple on the surface: download the app, root monitors how you drive, and eventually it will dictate a monthly price for your car insurance. Disclaimer: we do not offer Root Car Insurance. We are just making observations and opinions in this blog article.
Their website highlights “simple pricing, fair rates, and modern products”. As a insurance professional it is important to stay ahead of trends and understand the ever changing marketplace. I do believe there will be major disruption in the industry as time goes on, but is Root Car Insurance it? Let’s dive into some specifics of their offers before we make an opinion.
The Basics
1. Download the App
The first step to working with Root Car Insurance is to download their app on either the iPhone or Android. It is compatible with both operating systems which is very convenient. Currently the app is available on iPhone 5s and above and “most” androids.
2. Drive!
Once you have downloaded the application then its time to drive. They will monitor your driving behavior such as speed, braking, what time of the day you drive, where you drive, etc. This is not a new phenomenon in the insurance industry as the majority of insurance companies now offer plug-in devices or apps to just this.
3. Choose your plan
After a sufficient amount of data has been collected on your driving habits then the Root Car Insurance app will offer you different coverage packages for different prices.
How Much Can You Save?
Their website currently states that there is, “only one way to find out!” I love this because it is very true. You will never know how much money you can save with any insurance carrier until you get a quote, or in Root Car Insurance’s instance, until you try their app. They go on to state that customers have saved “52% or more” on their car insurance. An enormous figure, but not unreasonable. Just this week we saved a customer over $4,000 on their total insurance package. This included their auto, home, and umbrella coverage. They went from $8,200 to below $4,000. So it can happen – nothing new here.
Where is Root Car Insurance Available Currently
The app is available and live in many states including Maryland and Pennsylvania. I’m not sure of their intentions in other eastern states, but we will see as time goes on. They do recognize on the website that “each state is regulated differently” and they are trying to expand as fast as they can.
How Does Root Rate Drivers
The whole marketing focus of Root seems to be on how you drive. Their front page says it right there, “Get a rate based primarily on how you drive”. Primarily is a key word here because it means that it truly is only a fraction of the total rating calculation.
Here we have a breakdown of the rating considerations for the Root Car Insurance app. This graph highlights driving ability as the number one consideration with the BMV record in second. The BMV record is the driving history, or score, of the driver. Oftentimes this is the number one consideration for most car insurance carriers. So Root has stepped out on faith and inverted their calculations for pricing when compared to the conventional methodology.
I feel like this graph gives a more digestible illustration comparing the Root Car Insurance app’s pricing versus a traditional model. As you can see Root definitely takes the driving score into a higher consideration.
I do think the “traditional” model is a bit skewed. As time has progressed regular insurance companies do consider the driving score more and more. For instance, Nationwide will give a driver a huge discount if they demonstrate that they are safe drivers. Those discounts can range from 5-35%. That is a huge amount which is potentially comparable to Root’s pricing model, just taken from a different angles.
Opinions & Potential Problems
Adverse Selection
I applaud the Root Car Insurance app for attempting to take insurance into a new era. The biggest problem that I see ahead for them is adverse selection.
Adverse selection is a risk insurance companies tackle daily. A common example is a person purchasing life insurance claiming to be a non-smoker when in actuality they do smoke.
I believe because Root focuses on “driving ability” and less on driving history they have positioned themselves for an adverse selection scenario. High-risk drivers usually have high insurance costs, and that is a very purposeful. Now those high-risk drivers are often shoppers of insurance too. “Shoppers” is a term in the insurance industry that refers to individuals who jump from company to company seeking the lowest cost possible. Root seems like a perfect candidate for shoppers, but unfortunately they are often bad drivers. This adverse selection could be a big issue as claims arise and progress.
The Local Touch
Another disadvantage Root has is that they are 100% web based. They tout their app to be able to handle any scenario for customer service. If you get into a car accident and you have the Root Car Insurance app – then the app should be able to handle that. They also have a customer support team available 24/7 via email and they “do their darn best to return all emails within 24 hours”.
I see this as a huge issue. I can understand the reasoning behind creating an awesome app to handle it all. It helps on HR costs and therefore can hopefully decrease the insurance rates for their clients. I get it. It is a great idea but if someone gets into an accident – they want to talk to somebody – and better yet – somebody who they know and built a relationship with and can potentially see in person.
I utilize Google Trends often. When I type in Root Insurance into Google Trends the top inquiries are: “root insurance phone number” and “root insurance customer service number”. Although it is buried in their website, they do have an actual number and it is 18669809431. That is me doing my part to help all those google searchers looking for it.
Again, the Root Car Insurance App’s Customer Service Number is 18669809431
Final Thought
Like I state before, I applaud Root’s efforts and believe if they can overcome the adverse selection issue and maintain awesome customer service – then they have a shot.
-Jesse Cunningham V, Owner of Mountain View Insurance Solutions – Bel Air, MD
If you would like to get a quote from a “traditional” car insurance company and build a relationship with a insurance professional then consider working with us. If you have any questions, want a quote, or free consultation, please give us a call at 4102623176 or fill out the form below.