Car Insurance Rates Are Biased. Meet the Duo Working to Rewrite the Rules

A photo to accompany a story about Loop, a new tech-based auto insurance company Getty Images / loopinsure
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The auto insurance industry has long faced accusations of discriminatory pricing practices when determining rates. John Henry and Carey Nadeau want to fix that. 

They are the duo behind a new auto insurance company, Loop, which uses technology and data collection to try to overcome those biases.

“I see insurance as a vehicle to deploy empathy at scale,” Henry says. “The more you take a closer look, the more you realize that folks are just tolerating what exists in this seemingly omnipresent industry.” 

Loop is an insurance startup that’s trying to bring more equity to the rules of auto insurance.  Instead of relying on metrics such as credit score, income, marital status, and education to create auto insurance rates—all factors influenced by structural inequalities—Loop says it will use two key metrics to give its customers a price: state of roads and driver behavior. 

The proposition is simple: Loop will collect data about how and where you drive, and in exchange you’ll pay insurance premiums that depend less on demographic details beyond your control. 

“People who live in African-American communities who are Black pay 70% more [for car insurance] than people who live in white, upper middle-class suburban neighborhoods. That’s wrong, and we can use numbers to fix that,” says Nadeau.

Empowerment Through Big Data

Henry and Nadeau met at a tech conference they were both speaking at, and initially connected over each other’s work. But they also discovered a shared passion: economic empowerment for underserved communities.

They teamed up to start building Loop in July 2020, after the protests after the killing of George Floyd in Minneapolis inspired them to take on more meaningful challenges. Together, they want to defeat decades of bad practices in the auto insurance industry that disproportionately hurt historically disadvantaged groups, according to analysis from ProPublica and the Consumer Federation of America.  

“We’ve really rethought through the entire experience that is insurance, from what goes into it to how it’s expressed. Ultimately, we want to put people first,” says Henry. 

Henry is the entrepreneur of the duo; Nadeau is the big-data scientist. At just 28, Henry’s resumé includes launching nonprofit business accelerator Cofound Harlem, hosting “Hustle” on Vice TV, making it onto the Forbes 30 Under 30 list, and co-founding the venture capital firm Harlem Capital. 

Henry credits the development of Loop’s technology to Nadeau, a MIT-trained statistician who happens to have grown up in the so-called insurance capital of the world — Hartford, Connecticut. She spent years studying cities at the Brookings Institution and the Urban Institute before launching her first business, Ometry, a risk technology company that measures road safety. 

“You have the brand mind and the data mind coming together, and I think it’s so symbolic of what we’re aiming to do,” Henry says.

How Loop Works

Loop is technically a managing general agent, which acts as a broker and a vendor of insurance policies and makes a gross commission on every one it sells. It’s also a B Corporation, a designation granted by a nonprofit association which identifies companies that “balance profit and purpose” (the list includes Patagonia and Allbirds, among many.) 

Loop will launch as an app — where you’ll be able to manage all aspects of your auto policy — by summer 2021 in Texas and then in 10 more states, including Maryland, Oregon, and New York. Henry and Nadeau say there are about 10,000 people on Loop’s waitlist so far. 

The app will use impartial factors like age, driving record, and location to price people at the beginning. From there, rates become more personalized as users share data with the company.

Because Loop uses artificial intelligence, data, and telematics — the transmission of data from the vehicle to a company server — the co-founders say it can price customers more fairly. 

“To get rid of credit, education, occupation, which we feel creates a lot of inequity in the pricing, we instead say the two things that should matter the most for car insurance is how you drive and where you drive,” says Henry. “So in order to enable us to do that, you download the app and we’re on the journey with you.”

Telematics, also known as usage-based insurance, monitors your driving in real time. Loop wants to use the data it obtains this way to both set rates and reward safe driving. “You can become a better driver and be rewarded for those behaviors,” says Nadeau.

That’s similar to what traditional auto insurers do with their own telematics programs, like State Farm’s Drive Safe & Save or Allstate Drivewise, which also reward safer behaviors with lower premiums. But Loop differs from that: legacy insurance companies will use telematics to give you discounts, but your main auto rates are still influenced by personal demographics, whereas Loop mostly uses telematics. Loop will monitor your driving behavior and even give you tips on how to be a safer driver and reroute you to avoid unsafe roads. Anyone on Loop’s waitlist will be able to get a quote before the app goes live, Henry says. 

There are data privacy concerns about the use of telematics, but the co-founders think they can reach people who are comfortable with swapping their location and driving data for fairer prices. Roughly 50% of Americans say they’re willing to share data with an insurer for a lower premium and/or tailored coverage, according to a recent survey by Deloitte. 

“The byproduct is a much more competitive rate for customers who are safe drivers but have been systematically overpriced for reasons other than their driving history,” Henry says. “You only have a better rate to work towards.”

David Snyder, vice president of policy at the American Property Casualty Insurance Association, a trade association for insurance companies, rejects allegations that traditional insurance companies discriminate in auto pricing. They are simply trying to make predictions, he says.  

“All states have a basic foundation of regulation. Insurance companies can’t do whatever they want to do when they want to do it. They have to prove to the regulator that the prices they are charging are not excessive, inadequate, or unfairly discriminatory,” says Snyder. “They need to reflect the risk of loss.”

The Future of Loop

Henry and Nadeau say Loop’s technology stands out enough to survive the competitive auto insurance market.

“It’s not 1989 anymore. There is more data, more technology, and more appetite from consumers for a product that meets their needs and feels like it was built for them,” says Nadeau. “This is the way the industry is going.”

While the co-founders admit the goal is ambitious, they’re backed by venture capital firms and angel investors that also believe in their mission. The startup raised a $3.25 million seed round as a result. 

“Economic mobility is tied to physical mobility, and we’ve encapsulated that in our purpose.” Henry says. “If we are right, companies will follow our footsteps.”

Henry and Nadeau say they might expand beyond auto insurance, too, if their business model works. 

“We’re an insurance company — all frills aside,” says Henry. “We just happen to be a big-hearted insurance company that wants to be there for our community. We’re going to let the community be our guide.”