Zipcar and LogMeIn Veterans Out to Reshape Car Insurance With Censio

Remember when drivers talking on cell phones were annoying? OK, they still are—but at least that usually means they aren’t looking down at their screen as they plow into a bike, pedestrian, or your car.

Distracted drivers are the worst. Now they’re the target of a Boston startup that’s using—guess what—smartphones and apps to monitor drivers’ behavior and form partnerships with insurance companies. Fighting fire with fire, it seems.

Censio came out of stealth mode last month when it announced a partnership with Progressive Insurance to develop a mobile app for monitoring drivers. On Tuesday the startup said it had raised $10 million in Series A venture funding led by General Catalyst Partners, with Bain Capital Ventures and Lakestar also participating. Censio said it has raised $13 million to date.

As usual, the most interesting part of the story isn’t the funding. It’s what Censio is building, and why. The 20-person company is led by co-founder and interim CEO Scott Griffith (pictured above), the former CEO of Zipcar, who’s also an executive-in-residence at General Catalyst. The other founders come from Harvard, MIT, and insurance-tech firm Enservio, while Censio president Kevin Farrell was previously a vice president at LogMeIn.

The irony of using smartphones to monitor drivers on their smartphones isn’t lost on Griffith. Rather, he says, it’s part of Censio’s original mission to “move the needle on safety on the road.” The other part of the mission is to create a “new business model for insurance companies,” he says.

Here’s the background. Two years ago, Griffith says, most insurance companies thought that usage-based insurance—tracking drivers and charging them based on their individual behavior—was a niche idea, and that it would require special hardware to plug into the car. About a year ago, he says, insurance executives started thinking more customers would be open to the idea of being charged based on behavior—but they still thought it would require a dedicated device.

Now, in the last few months, “the whole industry seems to be waking up,” Griffith says. “If you can really do this on a smartphone, that’s a game changer.”

And that is what Censio has been out to prove. No one’s saying a smartphone app is better or more comprehensive than a telematics device that plugs into a diagnostic port, but Censio is saying its app—which makes use of the phone’s GPS, accelerometer, gyroscope, and magnetometer (compass)—is good enough to give an accurate picture of a person’s driving behaviors. Think hard braking, fast turns, and, yes, texting while driving. And presumably it’s easier to get drivers to buy in if they can just use their smartphone, which they already have with them.

Kevin Farrell

Kevin Farrell

“Really for the first time, we’ll get a firm view of what distracted driving is,” Farrell (pictured) says. What’s more, he says, Censio tracks whether individual drivers’ behaviors are getting better or worse over time, and how they compare to other drivers.

Censio touts potential savings of 20 to 30 percent in insurance premiums for safe drivers—amounting to hundreds of dollars a year for a typical policy. But the flip side is that other drivers—the tailgating and texting types, one would hope—will pay more. Indeed, the overall concept is intriguing: using insurance costs as an almost real-time incentive for people to drive more safely.

First the system has to work well. The company’s offering comes down to a lot of data science and machine learning. “The real hard work is taking the data once it’s off the phone and, in a mega-dataset, crunching that in a way that’s simple and easy for insurance companies to work with,” Griffith says.

For now, Censio is concentrating on signing up more insurance companies to use its technology and getting its software out into the world. (The Progressive partnership is non-exclusive.) Down the road, Griffith says, the company might explore possibilities around marketplaces for consumers to shop around for insurance, or partnerships with original equipment manufacturers—presumably to get Censio’s technology into more cars.

Coming from Zipcar, Griffith knows the automotive world—and he knows consumers. He says he learned that people are willing to change their behavior if it saves them money. He also knows that “it may take a consumer kicking and screaming to bring an industry along.”

While Censio thinks of itself as a business-to-business startup, he admits the team has “had a sparkle in our eye of, should we be a consumer company?” (They wouldn’t be the first to try—Kayak co-founder Paul English developed a consumer driving app called Road Wars a couple years ago.)

Griffith and Farrell see the insurance industry ultimately going through a big shift. There’s a long way to go before driverless cars take over (if ever they do), and, in the interim, trends like car-sharing and on-demand services could lead to new kinds of fair-pricing models based on data. “We think the world is moving towards driver-based insurance, not car-based insurance,” Griffith says.

That would seem to sum up their bet with Censio pretty well.

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and Editor of Xconomy Boston. E-mail him at gthuang [at] xconomy.com. Follow @gthuang

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