Last month, I finally followed through on longstanding plans to earn my motorcycle license. In my mind, riding bikes allows me to cover a broader swath of the automotive market, while also hopefully making Monterey Car Week much more enjoyable. Plus, the fun factor of exploring speed and skill on a motorcycle roaring around on the greatest roads of Los Angeles sounded too good to pass up.
The realities of motorcycle riding hit home quickly, though, both in the CHP's California Motorcycle Safety Program and out on city streets. Gearing up safely requires significant investment, traffic presents all kinds of new challenges, and adjusting to a new mode of transportation takes time. Plus, there's the insurance factor—especially for someone like me, who might end up riding many different bikes over the course of a given year.
Hoping to learn more about motorcycle insurance, in general, and how insurance might work for me, in particular, I recently spoke with Voom Insurance co-founder and CEO Tomer Kashi about why motorcycles probably represent the best application of today's increasingly popular pay-by-mile insurance format.
Tomer Kashi Of Voom Insurance
To be clear, while a number of auto insurance companies offer pay-by-mile packages, Voom currently represents the only option for motorcyclists. For Kashi, the challenge of building a start-up to break into a new market segment helped nudge him towards founding Voom.
"I'm a computer scientist and physicist that somehow became an insurance tech company co-founder and CEO," he told me. "Before founding Voom. I was working for the government in Israel and working on some interdisciplinary projects that are both technological, but also involved some product and intelligence and working with different organizations around the world. And what I really like is to solve conflict, interdisciplinary problems, problems where technology is important, but you really need all of the pieces of the pie to work together."
Anyone who took the bait and compared coverage and policy rates after watching one of the ubiquitous Progressive, Geico, or Allstate commercial lately knows all about the complexities of choosing insurance—now imagine needing to set those rates within an entirely new framework, then trying to convince the general public of the potential benefits of your coverage.
"I think that insurance is exactly this kind of problem," Kashi said. "Pricing the risk and that actual side is really important, but also the ability to collect the data and the ability to issue policies and the ability to market the products and the compliance. It's a really complex and interdisciplinary problem."
Introducing A New Pay-By-Mile Model
A rider himself, Kashi recognized that much like for healthcare, the law of averages for motorcycle insurance actually benefits those who ride the most often.
"You won't be surprised that the more someone rides, the more likely something could happen, right?" he asked me, hypothetically. "If the motorcycle is parked in the garage for the entire year, the risk is different than someone that just every day is on the road."
Various studies that Voom and Kashi take into consideration, including by the National Highway Traffic Safety Administration, churn out different specific figures but the numbers still paint a stark picture, regardless. An average rider covers somewhere between 400 and 2,000 miles per year. But apparently, the median is more like 1,000 miles, so approximately 50% of riders are riding fewer than that each year. That means approximately 70% of riders overpay for the 30% who rack up more miles.
"What happens is that since everybody's paying the average, a lot of people are overpaying for the few that are really lucky to ride," Kashi explained. "Essentially, every rider that rides less than 2,000 miles is going to save money with us. The less you ride, the more you save. But if you're riding that average, then it might make sense to you to work with Voom as your insurance company."
Breaking Into The Antiquated Insurance Market
Selecting your different coverage options on Voom's app or website can result in surprisingly affordable rates. But I asked Kashi why, if the numbers sound so good, more insurance companies don't already offer pay-by-mile options for motorcycle riders.
"That's a really, really good question," he replied, "Because it actually asks about the fundamentals of insurance, in general, and the fundamentals of insurance companies, in general. These companies are giant and innovation in insurance is quite hard."
"I think that product innovation is probably the toughest of problems, again, because it's very interdisciplinary and the compliance and the IT. They have, you know, mainframe systems from the '80s."
Part of the issue might involve the sheer number of automobile drivers versus the number of motorcycle riders in the United States, when seen through the lens of a massive insurance company.
"Obviously for a startup, it's a really big market," he said, "But for big insurance companies, they just don't care. And they prefer to innovate in car insurance and home insurance and other mainstream markets, and they really overlook or neglect the smaller markets. And the formula is not that they neglect the market—they neglect the rider. "
Currently Available In Six States
If you ride motorcycles and haven't heard of Voom yet, blame the logistics of navigating the insurance regulations of individual states.
"We're the only pay-by-mile solution today in the US market, we launched relatively recently," Kashi said. "The problem with insurance is that it's regulated on a state level. And for each and every state that we wanna operate in, we really have to think about hundreds of pages that we need to submit to the state to prove that our pricing is accurate and fair, not discriminatory and many other things. They need to understand your product and make sure that it's fine. Some states are quicker than others, some of them have more questions. And it's just a process that we, as a tech company but also as an insurance company, need to go over."
At the moment, Voom offers coverage in six states: Indiana, Illinois, Ohio, Arizona, Wisconsin, and Iowa. Riders in Oklahoma and Texas can expect to see targeted Voom ads next.
"By the end of this quarter, we plan to be in nine, 10 states," Kashi predicted. "The customer feedback is, so far, amazing."
How Voom Works For Customers
New customers can receive quotes for their base rate and per-mile additions by filling in their details online. Voom's then keeps track of mileage ridden by prompting customers to take photos of their odometers and submit them into the company's smartphone app.
"The quote shows you a base price," Kashi explained, "That you pay in order to cover your modelcycle, plus a per-mile rate of just a few cents per mile. Obviously just based on per-mile rate differs if you want to have only liability insurance or liability and comprehensive and collision and higher limits and so and so forth. But you're paying exactly according to how much you rode."
I asked how Voom handles motorcycle enthusiasts who own multiple bikes.
"The two main customers that we have are either ones that just don't have a lot of time to ride," Kashi responded, "Or ones that actually have many bikes and for which, every one of them, they're not really hiding a lot. So this is a good use-case for us. We have many customers that have multiple bikes and they do report the mileage of each and every bike that they have."
Plans For Continued Expansion
In my mind, keeping track of the bikes and mileage only leaves a bit of the insurance game to chance, especially given that different riders wear different amounts of specific motorcycle armor—and ride differently, too. Can Voom track safety precautions and riding style, or at least take those factors into consideration when pricing policies?
"Putting the insurance hat on, a lot of the risk that is covered is unrelated to the bodily injury of the rider themself," Kashi said. "It could be third-party liability or what happens to the motorcycle and things of that nature."
But Kashi wanted to make it clear that Voom does take into consideration all the other factors that all the other "traditional" insurance companies require.
"We're using all of the tens of factors that all others are using and on top of that, we're adding the mileage," he explained. "That is one single factor which is super crucial in analyzing the risk. And I think that by the fact that we're using mileage, we can give less weight to other factors that could be discriminatory. So, for example, where you live or your credit score and things like that, we do just like any other insurance companies, need to take it into account in the pricing. But the fact that we take mileage into account really gives much less weight to all other factors."
Whether Voom will work for someone in my profession remains a question—will I be able to take pictures of odometers for all the loaner bikes I review? At the moment, the point is moot, though, since Voom's expansion into California looks a ways off. I did bring up the minimal change in my automobile insurance rate that I noticed recently when I upped the mileage on my 2006 Porsche Cayenne Turbo's policy. Turns out, in most other states, mileage factors into standard automotive insurance not at all.
"Only in California," Kashi informed me, "Is it a regulation in which you need to report the mileage to the insurance company."
But now, Voom hopes to make money by saving money for customers all over the country by introducing that simple, yet critical, statistic into their calculations for motorcycle insurance risk nationwide.
Sources: voominsurance.com, nhtsa.gov, progressive.com, geico.com, and allstate.com.