Allstate Corp. is establishing itself as a rival to Metromile Inc.'s Metromile Insurance Co. in the pay-per-mile private auto insurance niche.

Allstate's Milewise program has been available in Texas and Oregon for some time and recently expanded into New Jersey as well. The insurer has also offered a pay-per-mile program via its Esurance brand in Oregon since October 2015.

Pay-per-mile insurance differs from traditional private auto insurance as it calculates premiums based on two components: a base rate and a per-mile rate. The base rate is determined in ways similar to that of a regular private auto policy, with factors including the policyholder's driving history, age, the car make and model. An additional per-mile rate is charged on every mile driven, which is tracked by an on-board telematics device.

Both Milewise and Metromile charge daily mileage up to a certain threshold so drivers are not penalized for the occasional longer road trip. According to its website, Allstate charges its Milewise customers up to 150 miles daily, while Metromile stated on its homepage that its daily mileage charges are capped up to 150 miles in New Jersey. The cap is set at 250 miles in the other states where it currently operates. If a car is not driven on a certain day, the policyholder only pays the base rate.

Metromile started life as a managing general agent in 2011, offering usage-based private auto insurance policies underwritten by subsidiaries of National General Holdings Corp. It then acquired Mosaic Insurance Co., a Delaware-domiciled subsidiary of Axa, in a $20.3 million deal completed in mid-August 2016 in order to start underwriting its own private auto policies.

Metromile moved its private auto program to seven states in 2016, including California, Oregon, Washington, Pennsylvania, Virginia, New Jersey and Illinois. It became the fastest-growing U.S. P&C insurer in 2017, reporting a 1,061% year-over-year growth rate based on $52.8 million in direct premiums written. Metromile recently expanded into Arizona during the first quarter of this year. It also signaled potential intent to enter the Florida market, according to a form filing that was later withdrawn on Jan. 12.

Allstate has become the first of the big four U.S. auto insurers to challenge Metromile's presence in the pay-per-mile insurance marketplace; it launched the Milewise program in New Jersey during the second quarter. The insurer suggests that policyholders who drive an average of less than 25 miles a day, or roughly 9,000 miles annually, could see lower costs if they use the program.

"As different transportation methods continue to evolve, people are beginning to rely less on their personal vehicles and more on public transportation, ride-hailing and ridesharing," said Ginger Purgatorio, Allstate's vice president of product transformation. "Milewise offers a money-saving insurance solution to meet these changing customer needs."

During a second-quarter earnings call, Glenn Shapiro, president of Allstate's personal lines, described his early impression of Milewise's reception as "very positive." He said that many customers do not like paying for insurance when their cars are frequently parked and they use public transportation to get around.

"It doesn't make sense for them to pay those type of prices for full auto insurance," he said.

According to the FAQ section on its website, the Milewise telematics device detects not only the number of miles driven, but also information on location, time of day and driving behavior on a trip-by-trip basis. Metromile collects similar data via its Metromile Pulse device. However, this data is not used in calculating either the base or per-mile component of the insurance premium, and is only provided to the policyholder via a mobile app in order to determine trip costs.

The pay-per-mile insurance model differs from telematics-based private auto insurance because it offers a true usage-based premium, in which miles driven is the only variable input. Telematics-based auto insurance programs, including Progressive Corp.'s Snapshot, State Farm Mutual Automobile Insurance Co.'s Drive Safe and Save, Nationwide Mutual Group's SmartRide and Allstate's own Drivewise program, offer driver discounts based on safe driving behavior. The sole determinant in telematics-based insurance is not necessarily usage, as nighttime driving, hard-braking, speeding, and fast acceleration are all considered risk factors, and absence of such driving habits can lead to discounts and premium savings.

Nationwide has also received approval to launch a pay-per-mile program called SmartMiles in its home state of Illinois, which will be distinct from its telematics-based program known as SmartRide. The filing will take effect on Dec. 2 for new business and Jan. 12, 2019, for renewal business. With Nationwide's upcoming launch, Metromile will have a direct pay-per-mile competitor in three of the eight states where it currently does business.

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