10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to            

Commission File No. 001-39484

METROMILE, INC.

(Exact name of registrant as specified in its charter)

Delaware	84-4916134
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
425 Market Street #700 San Francisco, California	94105
(Address of principal executive offices)	(Zip Code)

(888) 242-5204

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	MILE	The Nasdaq Capital Market
Warrants	MILEW	The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s common stock, $0.0001 par value per share, outstanding as of August 6, 2021 was 126,727,134.

METROMILE, INC.

TABLE OF CONTENTS

		Page
PART I
Item 1.	Financial Statements (unaudited)	1
	Consolidated Balance Sheets	1
	Consolidated Statements of Operations	2
	Consolidated Statements of Comprehensive Loss	3
	Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)	4
	Consolidated Statements of Cash Flows	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	40
PART II
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	83
Item 3.	Defaults Upon Senior Securities	83
Item 4.	Mine Safety Disclosures	83
Item 5.	Other Information	83
Item 6.	Exhibits	84
SIGNATURES		85

i

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of present or historical fact included in this Quarterly Report on Form 10-Q are forward-looking statements. Any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. Forward-looking statements in this Quarterly Report on Form 10-Q may include, for example, statements about:

● our ability to recognize the anticipated benefits of the Business Combination (as defined herein), which may be affected by, among other things, competition and the ability of the combined business to grow and manage growth profitably;

● our financial and business performance, including financial projections and business metrics and any underlying assumptions thereunder;

● changes in our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans;

● the implementation, market acceptance and success of our business model;

● our ability to scale in a cost-effective manner;

● developments and projections relating to our competitors and industry;

● the impact of health epidemics, including the 2019 novel coronavirus (“COVID-19”) pandemic, on our business and the actions we may take in response thereto;

● our expectations regarding our ability to obtain and maintain intellectual property protection and not infringe on the rights of others;

● expectations regarding the time during which we will be an emerging growth company;

● our future capital requirements and sources and uses of cash;

● our ability to obtain funding for our future operations;

● our business, expansion plans and opportunities; and

● the outcome of any known and unknown litigation and regulatory proceedings.

In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would” or the negative of such terms or other similar expressions. Further, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These forward-looking statements and statements about our beliefs are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include the following:

● We have a history of net losses and could continue to incur substantial net losses in the future;

● We may lose existing customers or fail to acquire new customers

ii

● We may require additional capital to support business growth or to satisfy our regulatory capital and surplus requirements, and this capital might not be available on acceptable terms, if at all;

● The COVID-19 pandemic has caused disruption to our operations and may negatively impact our business, key metrics, and results of operations in numerous ways that remain unpredictable;

● We rely on telematics, mobile technology and its digital platform to collect data points that we evaluate in pricing and underwriting insurance policies, managing claims and customer support, and improving business processes, and to the extent regulators prohibit or restrict this collection or use of this data, our business could be harmed;

● Regulatory changes may limit our ability to develop or implement our telematics-based pricing model and/or may eliminate or restrict the confidentiality of our proprietary technology;

● We expect a number of factors to cause our results of operations to fluctuate on a quarterly and annual basis, which may make it difficult to predict future performance;

● Denial of claims or our failure to accurately and timely pay claims could materially and adversely affect our business, financial condition, results of operations, brand and prospects;

● Unexpected increases in the frequency or severity of claims may adversely affect our results of operations and financial condition;

● Failure to maintain our risk-based capital (“RBC”) at the required levels could adversely affect our ability to maintain regulatory authority to conduct our business;

● We are subject to stringent and changing privacy and data security laws, regulations, and standards related to data privacy and security, and our actual or perceived failure to comply with such obligations could harm our reputation, subject us to significant fines and liability, or adversely affect our business;

● If we are unable to underwrite risks accurately or charge competitive yet profitable rates to our customers, our business, results of operations and financial condition will be adversely affected;

● Litigation and legal proceedings filed by or against us and our subsidiaries could have a material adverse effect on our business, results of operations and financial condition;

● The insurance business, including the market for automobile, renters’ and homeowners’ insurance, is historically cyclical in nature, and we may experience periods with excess underwriting capacity and unfavorable premium rates, which could adversely affect our business;

● We are subject to extensive regulation and potential further restrictive regulation may increase our operating costs and limit our growth; and

● Our actual incurred losses may be greater than our loss and loss adjustment expense (“LAE”) reserves, which could have a material adverse effect on our financial condition and results of operations.

Additional discussion of the risks, uncertainties and other factors described above, as well as other risks and uncertainties material to our business, can be found under “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q, and we encourage you to refer to that additional discussion. Given these risks, uncertainties and other factors, you should not place undue reliance on these forward-looking statements. Also, these forward-looking statements represent our plans, objectives, estimates, expectations and intentions only as of the date of this filing. You should read this report completely and with the understanding that our actual future results and the timing of events may be materially different from what we expect, and we cannot otherwise guarantee that any forward-looking statement will be realized. We hereby qualify all of our forward-looking statements by these cautionary statements.

Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q. We caution you that these forward-looking statements are subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond our control.

iii

PART I

ITEM 1. FINANCIAL STATEMENTS

METROMILE, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

	December 31,			June 30,
	2020			2021
				(unaudited)
Assets
Investments
Marketable securities - restricted	$	24,651		$	46,637
Total investments		24,651			46,637
Cash and cash equivalents		19,150			202,584
Restricted cash and cash equivalents		31,038			41,335
Receivable for securities		-			754
Premiums receivable		16,329			18,410
Accounts receivable		4,999			1,542
Reinsurance recoverable on paid loss		8,475			-
Reinsurance recoverable on unpaid loss		33,941			-
Prepaid reinsurance premium		13,668			-
Prepaid expenses and other assets		7,059			7,803
Deferred transaction costs		3,581			-
Deferred policy acquisition costs, net		656			1,615
Telematics devices, improvements and equipment, net		12,716			13,045
Website and software development costs, net		18,401			18,957
Digital assets, net		-			919
Intangible assets		7,500			7,500
Total assets	$	202,164		$	361,101
Liabilities, Convertible Preferred Stock and Stockholders’ Deficit
Loss and loss adjustment expense reserves	$	57,093		$	65,476
Ceded reinsurance premium payable		27,000			-
Payable to carriers - premiums and LAE, net		849			595
Unearned premium reserve		16,070			16,820
Deferred revenue		5,817			5,658
Accounts payable and accrued expenses		8,222			8,879
Notes payable		51,934			-
Warrant liability		83,652			17,714
Other liabilities		8,554			10,443
Total liabilities		259,191			125,585
Commitments and contingencies
Convertible preferred stock, $0.0001 par value; 89,775,268 and 10,000,000 shares authorized as of December 31, 2020, and June 30, 2021, respectively; 68,776,614 and no shares issued and outstanding as of December 31, 2020, and June 30, 2021, respectively; liquidation preference of $302,397 and $0 as of December 31, 2020, and June 30, 2021, respectively		304,469			-
Stockholders’ equity (deficit):
Common stock, $0.0001 par value; 111,702,628 and 640,000,000 shares authorized as of December 31, 2020, and June 30, 2021, respectively; 8,992,039 and 126,727,134 shares issued and outstanding as of December 31, 2020 and June 30, 2021, respectively		1			12
Accumulated paid-in capital		5,482			746,981
Note receivable from executive		(415	)		-
Accumulated other comprehensive gain/(loss)		11			(15	)
Accumulated deficit		(366,575	)		(511,462	)
Total stockholders’ (deficit) equity		(361,496	)		235,516
Total liabilities, convertible preferred stock and stockholders’ deficit	$	202,164		$	361,101

See notes to consolidated financial statements.

1

METROMILE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share amounts)

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2021			2020			2021
	(unaudited)						(unaudited)
Revenue
Premiums earned, net	$	2,794		$	18,049		$	6,221		$	19,174
Investment income		139			19			419			55
Other revenue		4,785			10,030			9,768			26,145
Total revenue		7,718			28,098			16,408			45,374
Costs and expenses
Losses and loss adjustment expenses		2,366			22,640			7,771			34,903
Policy servicing expense and other		4,056			5,055			8,684			9,498
Sales, marketing and other acquisition costs		(300	)		25,926			3,588			73,220
Research and development		2,173			3,118			4,836			6,768
Amortization of capitalized software		2,799			2,701			5,496			5,352
Other operating expenses		3,965			16,738			9,214			25,327
Total costs and expenses		15,059			76,178			39,589			155,068
Loss from operations		(7,341	)		(48,080	)		(23,181	)		(109,694	)
Other expense
Interest expense		1,201			98			1,940			15,974
Impairment on digital asset		-			66			-			66
Increase (decrease) in fair value of stock warrant liability		356			(6,984	)		666			19,153
Total other expense		1,557			(6,820	)		2,606			35,193
Net loss before taxes		(8,898	)		(41,260	)		(25,787	)		(144,887	)
Net loss after taxes	$	(8,898	)	$	(41,260	)	$	(25,787	)	$	(144,887	)
Net loss per share, basic and diluted	$	(1.00	)	$	(0.33	)	$	(2.90	)	$	(1.43	)
Weighted-average shares used in computing basic and diluted net loss per share		8,886,421			126,693,218			8,878,928			101,236,461

See notes to consolidated financial statements.

2

METROMILE, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2021			2020			2021
	(unaudited)						(unaudited)
Net loss	$	(8,898	)	$	(41,260	)	$	(25,787	)	$	(144,887	)
Unrealized net gain (loss) on marketable securities		36			(17	)		31			(26	)
Total comprehensive loss	$	(8,862	)	$	(41,277	)	$	(25,756	)	$	(144,913	)

See notes to consolidated financial statements.

3

METROMILE, INC.

CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’
(DEFICIT) EQUITY

(dollars in thousands)

	Convertible Preferred Stock						Common Stock							Note			Accumulated Other Comprehensive			Accumulated
	Shares			Amount			Shares		Amount		APIC			Receivable			Income			Deficit			Total
Balances as of  December 31, 2019		67,728,286		$	304,469			8,730,377	$	1	$	3,816		$	(408	)	$	60		$	(246,478	)	$	(243,009	)
Retroactive application of recapitalization		1,048,328			-			135,133		-		-			-			-			-			-
As adjusted, beginning of period		68,776,614			304,469			8,865,510		1		3,816			(408	)		60			(246,478	)		(243,009	)
Exercises and vested portion of  common stock options		-			-			17,875		-		47			-			-			-			47
Stock-based  compensation		-			-			-		-		423			-			-			-			423
Interest on stock  purchase promissory note		-			-			-		-		-			(3	)		-			-			(3	)
Unrealized net loss on marketable securities		-			-			-		-		-			-			(5	)		-			(5	)
Net loss		-			-			-		-		-			-			-			(16,889	)		(16,889	)
Balances as of  March 31, 2020		68,776,614			304,469			8,883,385		1		4,286			(411	)		55			(263,367	)		(259,436	)
Vested portion of  common stock options		-			-			2,577		-		3			-			-			-			3
Stock-based  compensation		-			-			-		-		132			-			-			-			132
Interest on stock  purchase promissory note		-			-			-		-		-			(3	)		-			-			(3	)
Unrealized net gain on marketable securities		-			-			-		-		-			-			36			-			36
Net loss		-			-			-		-		-			-			-			(8,898	)		(8,898	)
Balances as of  June 30, 2020		68,776,614		$	304,469			8,885,962	$	1	$	4,421		$	(414	)	$	91		$	(272,265	)	$	(268,167	)
Balances as of  December 31, 2020		67,728,286		$	304,469			8,854,978	$	1	$	5,482		$	(415	)	$	11		$	(366,575	)	$	(361,496	)
Retroactive application of recapitalization		1,048,328						137,061							-			-			-
As adjusted, beginning of period		68,776,614			304,469			8,992,039		1		5,482			(415	)		11			(366,575	)		(361,496	)
Stock-based  compensation		-			-			-		-		3,208			-			-			-			3,208
Exercises and vested portion of stock options		-			-			1,089,670		-		2,059			-			-			-			2,059
Conversion of promissory  note		-			-			-		-		(415	)		415			-			-			-
RSUs withheld for  tax purposes		-			-			-		-		(422	)		-			-			-			(422	)
Unrealized net loss  on marketable securities		-			-			-		-		-			-			(9	)		-			(9	)
Exercise of convertible  preferred stock warrants		3,974,655			132,718			-		-					-			-			-			--
Conversion of preferred stock to common		(72,751,269	)		(437,187	)		72,751,269		7		437,187			-			-			-			437,194
Business Combination and  PIPE financing		-			-			43,894,156		4		290,953			-			-			-			290,957
Net loss		-			-			-		-		-			-			-			(103,627	)		(103,627	)
Balances as of  March 31, 2021		-		$	-			126,727,134	$	12	$	738,052		$	-		$	2		$	(470,202	)	$	267,864
Vested portion of  common stock options		-			-			-		-		116			-			-			-			116
Stock-based  compensation		-			-			-		-		8,813			-			-			-			8,813
Unrealized net loss  on marketable securities		-			-			-		-		-			-			(17	)		-			(17	)
Net loss		-			-			-		-		-			-			-			(41,260	)		(41,260	)
Balances as of  June 30, 2021		-		$	-			126,727,134	$	12	$	746,981		$	-		$	(15	)	$	(511,462	)	$	235,516

See notes to consolidated financial statements.

4

METROMILE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Six Months Ended June 30,
	2020			2021
	(unaudited)
Cash flows from operating activities:
Net loss	$	(25,787	)	$	(144,887	)
Adjustments to reconcile net loss to cash used in operating activities
Depreciation and amortization		8,281			8,189
Stock-based compensation		555			12,021
Change in fair value of warrant liability		666			19,153
Telematic devices unreturned		497			710
Amortization of debt issuance costs		166			11,695
Noncash interest and other expense		340			3,872
Changes in operating assets and liabilities
Premiums receivable		189			(2,081	)
Accounts receivable		(975	)		3,457
Reinsurance recoverable on paid loss		(4,169	)		8,475
Reinsurance recoverable on unpaid loss		(1,413	)		33,941
Prepaid reinsurance premium		(763	)		13,668
Prepaid expenses and other assets		1,266			(938	)
Deferred transaction costs		-			3,581
Deferred policy acquisition costs, net		(328	)		(1,665	)
Digital assets, net		-			(985	)
Accounts payable and accrued expenses		(3,775	)		535
Ceded reinsurance premium payable		2,374			(27,000	)
Loss and loss adjustment expense reserves		(1,779	)		8,383
Payable to carriers - premiums and LAE, net		(1,769	)		(254	)
Unearned premium reserve		898			750
Deferred revenue		1,230			(159	)
Other liabilities		1,294			2,005
Net cash used in operating activities		(23,002	)		(47,534	)
Cash flows from investing activities:
Purchases of telematics devices, improvements, and equipment		(4,583	)		(3,170	)
Payments relating to capitalized website and software development costs		(7,368	)		(6,182	)
Net change in payable/(receivable) for securities		8,228			(754	)
Purchase of securities		(3,004	)		(32,626	)
Sales and maturities of marketable securities		28,760			10,515
Net cash provided by (used in) investing activities		22,033			(32,217	)
Cash flow from financing activities:
Proceeds from notes payable		25,880			2,015
Payment on notes payable		-			(69,351	)
Proceeds from merger with INSU II, net of issuance costs		-			336,469
Proceeds from exercise of common stock options and warrants		49			4,349
Net cash provided by financing activities		25,929			273,482
Net increase in cash, cash equivalents, restricted cash and restricted cash equivalents		24,960			193,731
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period		42,887			50,188
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period	$	67,847		$	243,919
Supplemental cash flow data:
Cash paid for interest	$	1,082		$	3,164
Non-cash investing and financing transactions:
Net liabilities assumed in the Business Combination	$	-		$	45,516
Net exercise of preferred stock warrants	$	-		$	56,160
Net exercise of promissory note	$	-		$	415
Capitalized website and software development costs included in accrued liabilities at period end	$	-		$	274
Capitalized stock-based compensation	$	196		$	373
Reclassification of liability to equity for vesting of stock options	$	11		$	169

See notes to consolidated financial statements.

5

METROMILE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Overview and Basis of Presentation

Metromile, Inc. (together with its consolidated subsidiaries, the “Company”) formerly known as INSU Acquisition Corp. II (“INSU”), was incorporated in Delaware on October 11, 2018. INSU was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

The registration statement for INSU’s initial public offering (“IPO”) was declared effective on September 2, 2020. On September 8, 2020 INSU consummated the IPO of 23,000,000 units (“Units”), and, with respect to the shares of Class A common stock, par value $0.0001 (the “Class A Common Stock”) included in the Units sold (the “Public Shares”), which included the full exercise by the underwriters of their over-allotment option in the amount of 3,000,000 Units, at $10.00 per Unit, generating gross proceeds of $230.0 million. Simultaneously with the closing of the IPO, INSU consummated the sale of 540,000 units (the “Placement Units”), at a price of $10.00 per Placement Unit in a private placement to the sponsor and Cantor Fitzgerald & Co. (“Cantor”), generating gross proceeds of $5.4 million. Transaction costs amounted to $14.2 million, consisting of $4.0 million in cash underwriting fees, $9.8 million of deferred underwriting fees and $0.4 million of other offering costs. Following the closing of the IPO on September 8, 2020, $230.0 million ($10.00 per Unit) from the net proceeds of the sale of the Units in the IPO and the sale of the Placement Units was placed in a trust account (the “Trust Account”), which was invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less, or in money market funds meeting certain conditions under Rule 2a-7 of the Investment Company Act, as determined by INSU.

Business Combination

On February 9, 2021, the Company consummated a merger pursuant to that certain Agreement and Plan of Merger and Reorganization, dated November 24, 2020, and as amended on January 12, 2021 and February 8, 2021 (the “Merger Agreement”), by and among INSU, INSU II Merger Sub Corp., a Delaware corporation and a direct wholly owned subsidiary of INSU (“Merger Sub”) and MetroMile, Inc., a Delaware corporation (“Legacy Metromile”), pursuant to which, among other things, Merger Sub merged with and into Legacy Metromile, with Legacy Metromile surviving the merger as a wholly owned subsidiary of the Company (the “Merger,” and together with the other transactions contemplated by the Merger Agreement, the “Business Combination”). In connection with the closing of the Business Combination (the “Closing”), the Company changed its name to Metromile, Inc., and Legacy Metromile changed its name to Metromile Operating Company. Unless the context indicates otherwise, references to “INSU” refer to the historical operations of INSU prior to the Closing, and references to the “Company,” “Metromile” and “Metromile Operating Company” refer to the historical operations of Legacy Metromile and its consolidated subsidiaries prior to the Closing and the business of the combined company and its subsidiaries following the Closing.

The Merger was accounted for as a reverse recapitalization in accordance with accounting principles generally accepted in the United States (“GAAP”). Under this method of accounting, INSU, who was the legal acquirer, is treated as the “acquired” company for financial reporting purposes and Metromile Operating Company is treated as the accounting acquirer. This determination was primarily based on the fact that Metromile Operating Company’s stockholders prior to the Merger have a majority of the voting power of the Company, Metromile Operating Company’s senior management now comprise substantially all of the senior management of the Company, the relative size of Metromile Operating Company compared to the Company, and that Metromile Operating Company’s operations comprise the ongoing operations of the Company. Accordingly, for accounting purposes, the Merger is treated as the equivalent of a capital transaction in which Metromile Operating Company issued stock for the net assets of INSU, which are stated at historical cost, with no goodwill or other intangible assets recorded, and Metromile Operating Company’s financial statements became those of the Company.

Pursuant to the Amended and Restated Certificate of Incorporation of the Company, at the closing, each share of INSU’s Class B Common Stock, par value $0.0001 per share (the “Class B Common Stock”), converted into one share of INSU’s Class A Common Stock. After the Closing and following the effectiveness of the Second Amended and Restated Certificate of Incorporation of the Company, each share of Class A Common Stock was automatically reclassified, redesignated and changed into one validly issued, fully paid and non-assessable share of the Company’s Common Stock, par value $0.0001 per share (the “Common Stock”), without any further action by the Company or any stockholder thereof.

On February 9, 2021, a number of purchasers (each, a “Subscriber”) purchased from the Company an aggregate of 17,000,000 shares of Common Stock (the “PIPE Shares”), for a purchase price of $10.00 per share and an aggregate purchase price of $170.0 million, pursuant to separate subscription agreements (each, a “Subscription Agreement”) entered into effective as of November 24, 2020. Pursuant to the Subscription Agreements, the Company gave certain registration rights to the Subscribers with respect to the PIPE Shares. The sale of PIPE Shares was consummated concurrently with the Closing.

Description of Business after the Business Combination

The Company, through Metromile Operating Company and its wholly owned subsidiary, Metromile Insurance Services LLC (the “GA Subsidiary”), sells pay-per-mile auto insurance to consumers in eight states: California, Washington, Oregon, Illinois, Pennsylvania, Virginia, New Jersey, and Arizona. Metromile Operating Company has a wholly owned subsidiary, Metromile Insurance Company (the “Insurance Company”), which focuses on property and casualty insurance. In January 2019, Metromile Operating Company formed Metromile Enterprise Solutions, LLC (“Enterprise”), a wholly owned subsidiary, which focuses on selling its insurance solution technology to third party customers.

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The Insurance Company provides auto insurance to customers with premiums based on a flat rate plus an adjustable rate based on actual miles driven. To record miles driven, the GA Subsidiary may provide drivers with a telematics device, the Metromile Pulse, which plugs into a car’s on-board diagnostic system to capture mileage.

The GA Subsidiary acts as a full-service insurance General Agent (“GA”). As a full-service GA, the subsidiary provides all policy pricing, binding, and servicing (payments and customer service) for the policyholders. Until late 2016, the GA Subsidiary underwriting carrier was National General Insurance (“NGI”) and its related carriers. The GA Subsidiary began transitioning NGI-issued policies upon renewal in late 2016 to the Insurance Company and has only a small number of policies with NGI as of June 30, 2021. Policies underwritten by the Insurance Company are binded by the GA as well as through a network of independent agents.

NGI handles claims for the GA Subsidiary’s policies underwritten by NGI and its related carriers, for which it pays NGI a fee for the LAE. NGI bears the risk of loss under these policies. Accordingly, the Company has no exposure to claims that would require an accrual for those NGI-related losses.

The Insurance Company bears risk of loss under all insurance policies it underwrites. The financial statements include reserves for future claims based on actuarial estimates for the Insurance Company. The Loss and LAE reserves as of December 31, 2020 and June 30, 2021 (unaudited) were $57.1 million and $65.5 million, respectively.

Basis of Presentation

The accompanying interim unaudited consolidated financial statements have been prepared in accordance GAAP and in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). References to the Accounting Standard Codification (“ASC”) and Accounting Standard Updates (“ASU”) included hereinafter refer to the Accounting Standards Codification and Updates established by the Financial Accounting Standards Board (“FASB”) as the source of authoritative GAAP. The consolidated financial statements include the accounts of Metromile, Inc. and its subsidiaries, all of which are wholly owned. All intercompany accounts and transactions have been eliminated in consolidation.

These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2020, which are included in the Company’s Post-Effective Amendment No. 1 to Form S-1 filed with the SEC on August 9, 2021. 

Liquidity and Capital Resources

The Company’s consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has had recurring losses and an accumulated deficit since its inception, related primarily to the development of its website, technology, customer acquisition, insurance losses and other operations. The Company obtained additional funding of $310 million in 2021 in connection with the Business Combination to support its ongoing operations and fund future growth of the Company. Management has concluded that substantial doubt regarding the Company’s ability to continue as a going concern for the period August 2021 through September 2022 has been alleviated based upon the recent funding and future operational improvement plans. 

In the first quarter of 2020, the global pandemic caused by COVID-19 breached the U.S. and resulted in Shelter-In-Place orders across the country and insurance department bulletins limiting the actions that insurance carriers may take and reducing the amount of premiums that will be promptly received in the short term. These factors resulted in a significant decline in both revenues and losses of the Insurance Company. In addition, in response to these events, the Company performed a temporary reduction in force of 125 employees to further align costs with revenue during the second quarter of 2020. The Company will continue to monitor the situation closely, but given the uncertainty about the duration or magnitude of the pandemic, management cannot estimate the impact on its financial condition, operations, and workforce.

Unaudited interim financial information

The accompanying interim consolidated balance sheet as of June 30, 2021, the interim consolidated statements of operations, comprehensive loss, convertible preferred stock and stockholders’ (deficit) equity for the three months and six months ended June 30, 2020 and 2021, and cash flows for the six months ended June 30, 2020 and 2021 are unaudited. These unaudited interim consolidated financial statements are presented in accordance with the rules and regulations of the SEC and do not include all disclosures normally required in annual consolidated financial statements prepared in accordance with GAAP. In management’s opinion, the unaudited interim consolidated financial statements have been prepared on the same basis as the annual financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of June 30, 2021 and the Company’s consolidated results of operations for the three months and six months ended June 30, 2020 and 2021, and cash flows for the six months ended June 30, 2020 and 2021. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full fiscal year or any other future interim or annual periods.

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Use of Estimates

The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. The Company’s principal estimates include unpaid losses and LAE reserves; the fair value of investments; the fair value of stock-based awards; the fair value of the warrant liability; premium refunds to policyholders; reinsurance recoverable on unpaid loss; and the valuation allowance for income taxes. Because of uncertainties associated with estimating the amounts, timing and likelihood of possible outcomes, actual results could differ materially from these estimates.

There have been no material changes to our significant accounting policies from our audited consolidated financial statements included in the Company’s Post-Effective Amendment No. 1 to Form S-1 filed with the SEC on August 9, 2021. 

Digital Assets, Net

During the six months ended June 30, 2021, the Company purchased an aggregate of $1.0 million in digital assets, comprised solely of bitcoin. The Company currently accounts for these digital assets as indefinite-lived intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other. The Company has ownership of and control over the purchased bitcoin asset and uses third-party custodial services to secure it. The digital assets are initially recorded at cost and are subsequently remeasured on the consolidated balance sheets at cost, net of any impairment losses incurred since acquisition.

An impairment analysis is performed at each reporting period to identify whether events or changes in circumstances, in particular decreases in the quoted prices on active exchanges, indicate that it is more likely than not that digital assets held by the Company are impaired. The fair value of digital assets is determined on a nonrecurring basis in accordance with ASC 820, Fair Value Measurement, based on quoted prices on the active exchange(s) that the Company has determined is its principal market for bitcoin (Level 1 inputs). If the carrying value of the digital asset exceeds the fair value based on the lowest price quoted in the active exchanges during the period, an impairment loss has occurred with respect to those digital assets in the amount equal to the difference between their carrying values and the price determined.

Impairment losses are recognized within Other expense in the consolidated statements of operations in the period in which the impairment is identified. The impaired digital assets are written down to their fair value at the time of impairment and this new cost basis will not be adjusted upward for any subsequent increase in fair value. Gains are not recorded until realized upon sale. There were no digital assets sales during the six months ended June 30, 2021.

Recent Issued Accounting Pronouncements

As an emerging growth company (“EGC”), the Jumpstart Our Business Startups Act (the “JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act until such time as the Company is no longer considered to be an EGC. The adoption dates discussed below reflect this election.

In February 2016, FASB issued ASU 2016-02, Leases (Topic 842). Lessees will need to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability. For income statement purposes, FASB retained a dual model, requiring leases to be classified as either operating or finance. Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines. Lessor accounting is similar to the current model but updated to align with certain changes to the lessee model and the new revenue recognition standard. The standard will be effective beginning after December 15, 2021. Early adoption is permitted. The Company is currently evaluating this new standard and the impact it will have on its consolidated financial statements.

In June 2016, FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), intended to improve the timing, and enhance the accounting and disclosure, of credit losses on financial assets. This update modified the existing accounting guidance related to the impairment evaluation for available-for-sale debt securities, reinsurance recoverables, and premiums receivables and could result in the creation of an allowance for credit losses as a contra asset account. The ASU requires a cumulative-effect change to retained earnings in the period of adoption and prospective changes on previously recorded impairments, to the extent applicable. The amendments in ASU 2016-13 are effective for fiscal years beginning after December 15, 2022. The Company is currently evaluating this new standard and believes that it will not have a material impact on the Company’s consolidated financial statements with its current investment portfolio.

In March 2020, FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions to contract modifications and hedging relationships that reference LIBOR or another reference rate expected to be discontinued. The standard is effective upon issuance through December 31, 2022 and may be applied at the beginning of the interim period that includes March 12, 2020 or any date thereafter. The Company is currently evaluating this new standard and the impact it will have on its consolidated financial statements.

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2. Fair Value of Financial Instruments

Topic 820, Fair Value Measurements, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Topic 820 also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

An asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

The following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheet, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Cash and Cash Equivalents

The Company’s cash and cash equivalents are demand and money market accounts and other highly liquid investments with an original maturity of three months or less. Demand and money market accounts are at stated values. Fair values for other cash equivalents are classified as Level 1 and are based upon appropriate valuation methodology.

Marketable Securities — Available-for-sale

The Company classifies highly liquid money market funds, U.S. Treasury bonds and certificates of deposit within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets and upon models that take into consideration such market-based factors as recent sales, risk-free yield curves, and prices of similarly rated bonds. Commercial paper, corporate bonds, corporate debt securities, repurchase agreements, and asset backed securities are classified within Level 2 because they are valued using inputs other than quoted prices that are directly or indirectly observable in the market, including readily available pricing sources for the identical underlying security which may not be actively traded. The Company did not hold any securities classified within Level 3 as of December 31, 2020 and June 30, 2021 (unaudited).

Assets measured on a recurring basis at fair value, primarily related to marketable securities, included in the consolidated balance sheets as of December 31, 2020 and June 30, 2021 (unaudited) (in thousands) are set forth below:

	Fair Value Measurement at December 31, 2020
	Level 1		Level 2		Level 3		Total
Cash equivalents
Money market accounts	$	6,771	$	-	$	-	$	6,771
Total cash equivalents		6,771		-		-		6,771
Restricted cash equivalents
Money market accounts		6,201		-		-		6,201
Certificates of deposits		3,331		-		-		3,331
Total restricted cash equivalents		9,532		-		-		9,532
Marketable securities - restricted
Corporate debt securities		-		5,955		-		5,955
U.S. treasury securities		6,994		-		-		6,994
Commercial paper		-		8,791		-		8,791
Asset backed securities		-		2,911		-		2,911
Total marketable securities - restricted	$	6,994	$	17,657	$	-	$	24,651

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	Fair Value Measurement at June 30, 2021 (unaudited)
	Level 1		Level 2		Level 3		Total
Cash equivalents
Money market accounts	$	196,296	$	-	$	-	$	196,296
Total cash equivalents		196,296		-		-		196,296
Restricted cash equivalents
Money market accounts		23,962		-		-		23,962
Certificates of deposits		3,331		-		-		3,331
Total restricted cash equivalents		27,293		-		-		27,293
Marketable securities - restricted
Corporate debt securities		-		4,473		-		4,473
U.S. treasury and agency securities		20,313		1,995		-		22,308
Commercial paper		-		14,681		-		14,681
Asset backed securities		-		5,175		-		5,175
Total marketable securities - restricted	$	20,313	$	26,324	$	-	$	46,637

Public and Private Warrants

At the Closing, Metromile Operating Company acquired the net liabilities from INSU, including warrants exercisable for common stock. The Company estimated the fair value of warrants exercisable for common stock measured at fair value on a recurring basis at the respective dates using the public trading price, for the Public warrants, and the Black-Scholes option valuation model, for the Private placement warrants (together with the public warrants, the “Warrants”), respectively. The Black-Scholes option valuation model inputs are based on the estimated fair value of the underlying common stock at the valuation measurement date, the remaining contractual term of the warrant, the risk-free interest rates, the expected dividends, and the expected volatility of the price of the Company’s underlying stock. These estimates, especially the expected volatility, are highly judgmental and could differ materially in the future.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. We consider our Public warrants to be Level 1 liabilities as we use publicly and readily available information to measure the fair value of the warrants. For our Private placement warrants, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date and as such are classified as Level 2 liabilities.

The table below sets forth a summary of changes in the fair value of the Company’s Level 1, Level 2, and Level 3 liabilities for the years ended December 31, 2020 and the six months ended June 30, 2021 (unaudited) (in thousands):

Balance at December 31, 2019	$	1,738
Issuance of warrant on Series E convertible preferred stock		12,620
Increase in fair value of warrant		69,294
Balance at December 31, 2020	$	83,652
Increase in fair value of warrants		47,062
Exercise of preferred stock warrants prior to Business Combination		(130,714	)
Public and Private placement Warrants acquired in Business Combination		45,623
Decrease in fair value of Public and Private placement Warrants		(27,909	)
Balance at June 30, 2021	$	17,714

The fair value of the Private placement warrants was determined using the Black-Scholes option valuation model using the following assumptions for values as of June 30, 2021:

	Estimated
	Fair Value of
	Warrants
	as of										Risk-Free			Expected
	June 30,		Exercise		Dividend						Interest			Term
	2021		Price		Yield			Volatility			Rate			(in Years)
Private placement warrants	$	770	$	11.50		0	%		65.00	%		0.79	%		4.6

In connection with the Merger, each of the Metromile Operating Company convertible preferred stock warrants outstanding as of December 31, 2020 was exercised for shares of Metromile Operating Company common stock. Therefore, there were no convertible preferred stock warrants outstanding after the Closing.

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Through the three months and six months ended June 30, 2020 and 2021 (unaudited), there were no transfers to or from any Level. The carrying amounts of accounts payable, accrued expenses and notes payable approximate their fair values because of the relatively short periods until they mature or are required to be settled.

3. Marketable Securities

The Company has investments in certain debt securities that have been classified as available-for-sale and recorded at fair value. These investments are included in both assets for securities with a maturity of one-year or less and assets for securities with a maturity of more than one-year. These securities are held in the Insurance Company and shown as restricted given that the transfer of these assets is subject to the approval of the state regulators. As of December 31, 2020 and June 30, 2021 (unaudited), deposits with various states consisted of bonds with carrying values of $4.9 million and $5.2 million, respectively.

When evaluating an investment for other-than-temporary impairment, the Company reviews factors such as the length of time and extent to which fair value has been below its cost basis, the financial condition of the issuer and any changes thereto, changes in market interest rates and the Company’s intent to sell, or whether it is more likely than not it will be required to sell the investment before recovery of the investment’s cost basis. As of December 31, 2020 and June 30, 2021 (unaudited), the Company does not consider any of its investments to be other-than-temporarily impaired. Unrealized gains and losses arising from the revaluation of available-for-sale securities are included in the consolidated statements of other comprehensive loss. Realized gains and losses on sales of investments are generally determined using the specific identification method and are included in the consolidated statements of operations.

The cost basis and fair value of available-for-sale securities as of December 31, 2020 and June 30, 2021 (unaudited) are presented below (in thousands):

	As of December 31, 2020
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gain		Loss		Fair Value
Marketable securities - restricted
Corporate debt securities	$	5,938	$	17	$	-	$	5,955
U.S. treasury securities		6,994		-		-		6,994
Commercial paper		8,791		-		-		8,791
Asset backed securities		2,911		-		-		2,911
Total marketable securities - restricted	$	24,634	$	17	$	-	$	24,651

	As of June 30, 2021 (unaudited)
	Amortized		Unrealized		Unrealized			Estimated
	Cost		Gain		Loss			Fair Value
Marketable securities - restricted
Corporate debt securities	$	4,473	$	-	$	-		$	4,473
U.S. treasury  and agency securities		22,319		-		(11	)		22,308
Commercial paper		14,681		-		-			14,681
Asset backed securities		5,175		-		-			5,175
Total marketable securities - restricted	$	46,648	$	-	$	(11	)	$	46,637

The amortized cost and estimated fair value of marketable securities as of December 31, 2020 and June 30, 2021 (unaudited) are shown below by contractual maturity (in thousands):  

	As of December 31, 2020
	Amortized		Estimated
	Cost		Fair Value
Due within one year	$	21,603	$	21,629
Due between one to five years		3,031		3,022
	$	24,634	$	24,651

	As of June 30, 2021 (unaudited)
	Amortized		Estimated
	Cost		Fair Value
Due within one year	$	45,898	$	45,893
Due between one to five years		750		744
	$	46,648	$	46,637

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4. Business Combination

As described in Note 1, the Business Combination was consummated on February 9, 2021 (the “Closing Date”). For financial accounting and reporting purposes under GAAP, the Business Combination was accounted for as a reverse acquisition and recapitalization, with no goodwill or other intangible asset recorded. As a result, the historical operations of Metromile Operating Company are deemed to be those of the Company. Thus, the financial statements included in this report reflect (i) the historical operating results of Metromile Operating Company prior to the Business Combination; (ii) the combined results of the Company and Metromile Operating Company following the Business Combination; (iii) the assets and liabilities of Metromile Operating Company at their historical cost; and (iv) the Company’s equity structure for all periods presented.

In accordance with guidance applicable to these circumstances, the equity structure has been restated in all comparative periods up to the Closing Date, to reflect the number of shares of the Company’s common stock issued to Metromile Operating Company stockholders in connection with the recapitalization transaction. As such, the shares and corresponding capital amounts and earnings per share related to Metromile Operating Company redeemable convertible preferred stock and Metromile Operating Company common stock prior to the Business Combination have been retroactively restated as shares reflecting the exchange ratio established in the Merger Agreement. Activity within the statement of stockholder’s equity for the issuances and repurchases of Metromile Operating Company redeemable preferred stock, were also retroactively converted to Metromile Operating Company common stock.

The following table reconciles the elements of the Business Combination to the consolidated statement of cash flows and the consolidated statement of stockholders’ equity for the six months ended June 30, 2021 (dollars in thousands).

	Recapitalization
Cash – INSU’s trust and cash (net of redemptions)	$	229,925
Cash – PIPE		170,000
Less transaction costs and advisory fees paid		31,456
Less cash payments to Metromile Operating Company stockholders		32,000
Net Business Combination and PIPE financing		336,469
Less non-cash net liabilities assumed from INSU		45,516
Net contributions from Business Combination and PIPE Financing	$	290,953

	Number of Shares
INSU Class A Common stock, outstanding prior to Business Combination		23,540,000
INSU Class B Common stock, outstanding prior to Business Combination		6,669,667
Less redemption of INSU shares		8,372
Common stock of INSU		30,201,295
Shares issued in PIPE		17,000,000
Business Combination and PIPE financing shares		47,201,295
Metromile Operating Company shares (1)		79,525,839
Total shares of common stock immediately after Business Combination		126,727,134

(1) The number of Metromile Operating Company shares was determined from the 78,313,665 shares of Metromile Operating Company common and preferred stock outstanding immediately prior to the closing of the Business Combination, which are presented net of the common and preferred stock redeemed, converted at the Exchange Ratio of 1.01547844. All fractional shares were rounded down.

5. Deferred Policy Acquisition Costs, Net

DPAC consists of the following (in thousands):

	December 31,			June 30,
	2020			2021
				(unaudited)
Deferred policy acquisition costs	$	10,511		$	11,069
Less deferred ceding commission		(1,202	)		(95	)
Less accumulated amortization		(8,653	)		(9,359	)
Deferred policy acquisition costs, net	$	656		$	1,615

For the three months ended June 30, 2020 and 2021 (unaudited), total amortization expense was approximately $0.4 million and $0.3 million, respectively. For the six months ended June 30, 2020 and 2021 (unaudited), total amortization expense was approximately $0.8 million and $0.7 million, respectively. During all periods presented the amortization expense was included as part of sales, marketing and other acquisition costs in the Company’s consolidated statements of operations.

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6. Digital Assets, Net

In June 2021, the Company purchased and received $1.0 million of bitcoin. During the three months and six months ended June 30, 2021, the Company recorded $0.1 million of impairment losses on bitcoin. There were no realized gains or losses recognized during the three months and six months ended June 30, 2021. As of June 30, 2021, the carrying value of the Company’s bitcoin digital assets held was $0.9 million, which reflects cumulative impairments of $0.1 million. The fair market value of bitcoin held as of June 30, 2021 was $0.9 million.

7. Loss and Loss Adjustment Expense Reserves

The following table provides a reconciliation of the beginning and ending reserve balances for losses and LAE, net of reinsurance recoverable, for the six months ended June 30, 2020 and 2021 (unaudited) (in thousands):

	Six Months Ended June 30,
	2020			2021
	(unaudited)
Balance at January 1	$	52,222		$	57,093
Less reinsurance recoverable		(28,837	)		(33,941	)
Net balance at January 1		23,385			23,152
Incurred related to:
Current year		6,928			33,727
Prior years		738			1,108
Total incurred		7,666			34,835
Paid related to:
Current year		2,324			9,760
Prior years		8,534			(17,249	)
Total paid		10,858			(7,489	)
Net balance at end of period		20,193			65,476
Plus reinsurance recoverable		30,250			-
Balance at end of period	$	50,443		$	65,476

These reserve estimates are generally the result of ongoing analysis of recent loss development trends and emerging historical experience. Original estimates are increased or decreased as additional information becomes known regarding individual claims. In setting reserves, the Company reviewed its loss data to estimate expected loss development. Management believes that the use of sound actuarial methodology applied to its analyses of historical experience provides a reasonable estimate of future losses. However, actual future losses may differ from the Company’s estimates, and future events beyond the control of management, such as changes in law, judicial interpretations of law and inflation, may favorably or unfavorably impact the ultimate settlement of the Company’s losses and LAE.

The anticipated effect of inflation is implicitly considered when estimating liabilities for losses and LAE. While anticipated price increases due to inflation are considered in estimating the ultimate claim costs, the increase in average severities of claims is caused by a number of factors that vary with the individual type of policy written. Future average severities are projected based on historical trends adjusted for implemented changes in underwriting standards, policy provisions, and general economic trends.

The estimation of unpaid losses and LAE reserves is based on existing factors at the date of estimation. Accordingly, future events may result in ultimate losses and LAE significantly varying from a reasonable provision as of the date of estimation. Unfavorable development of claims in future years could result in a significant negative impact on operations, stockholders’ surplus, and RBC. Such development, if not offset by other increases in stockholders’ surplus, could result in the insurance departments of the state of domicile taking regulatory actions against the Insurance Company.

During the six months ended June 30, 2021, the Company experienced unfavorable development on losses and LAE from prior accident years as a result of higher severity for the injury coverages. The Company has not had any unfavorable prior year claim experience on retrospectively rated policies. However, the business to which the development relates is subject to premium adjustments. In 2020, the Company experienced unfavorable development on losses and LAE from prior accident years as a result of adverse LAE development. The Company has not had any unfavorable prior year claim experience on retrospectively rated policies. However, the business to which the development relates is subject to premium adjustments.

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8. Reinsurance

During the periods presented, the Company used reinsurance contracts to protect itself from losses due to concentration of risk and to manage its operating leverage ratios. As of June 30, 2021, the Company has commuted all of its reinsurance agreements.

In February 2021, Metromile Insurance Company entered into a settlement agreement with Horseshoe Re Limited (“Horseshoe”) to commute the reinsurance agreements with effective dates beginning May 1, 2017, May 1, 2018, and May 1, 2019. Pursuant to the agreement, Metromile Insurance Company paid approximately $9 million, net, for commutation of the underlying agreements.

In June and July 2021, Metromile Insurance Company entered into settlement agreements with Horseshoe, Partner Reinsurance Company of the U.S. (“Partner”), Topsail Reinsurance SPC Ltd. (“Topsail”), The Cincinnati Insurance Company (“Cincinnati”) and Mapfre Re (“Mapfre”) to commute the reinsurance agreements between the parties with effective dates beginning May 1, 2017, May 1, 2018, May 1, 2019, and May 1, 2020. The commutations were effective April 30, 2021. Pursuant to the settlements, Metromile Insurance Company paid approximately $6.2 million, net, for commutation of the underlying agreements out of which $4.1 million was settled with reinsurers in July 2021 and included as part of other liabilities in the Company’s consolidated balance sheets as of June 30, 2021

Prior to the above-mentioned reinsurance agreement commutations, the Company had several reinsurance agreements in place. Effective May 1, 2017, two quota-share reinsurance agreements were entered into under which 85% of the Company’s premiums and losses related to its renewal business occurring May 1, 2017 through April 30, 2018 were ceded to two unaffiliated reinsurers. Effective May 1, 2018, three quota-share reinsurance agreements were in place whereby 85% of the Company’s premiums and losses related to its second term renewal business occurring May 1, 2018 through April 30, 2019, but not covered by the earlier quota-share agreements, were ceded to three unaffiliated reinsurers. Effective May 1, 2019, four quota-share reinsurance agreements were in place whereby 85% of the Company’s premiums and losses, subject to a loss corridor, related to its new and renewal business occurring May 1, 2019 through April 30, 2020, but not covered by the earlier quota-share agreements, were ceded to four unaffiliated reinsurers. Effective May 1, 2020, five quota-share reinsurance agreements were in place whereby 85% of the Company’s premiums and losses, subject to a loss corridor for one agreement, related to its new and renewal business occurring May 1, 2020 through April 30, 2021, but not covered by the earlier quota-share agreements, were ceded to five unaffiliated reinsurers. In addition, under the reinsurance agreements effective May 1, 2017 and May 1, 2018, LAE was ceded at a fixed rate of 3% of ceded earned premium. Under the reinsurance agreement effective May 1, 2019, LAE was ceded at a fixed rate of 6% of ceded earned premium. Under the reinsurance agreement effective May 1, 2020, LAE was ceded at a fixed rate of 4.75 – 6.0% of ceded earned premium. For the reinsurance agreements effective May 1, 2017 and May 1, 2018, the Company received a 10.2% ceding commission, sliding based on loss ratios of the ceded business. For the reinsurance agreement effective May 1, 2019, the Company received a 10.0% ceding commission. For the reinsurance agreement effective May 1, 2020, the Company received a 10.0 – 11.75% ceding commission, sliding based on loss performance of the ceded business.

In addition, the Company received revenue from the reinsurers related to the acquisition costs incurred related to the ceded policies. The revenue was based on the number of policies newly ceded to the reinsurers. During the three months ended June 30, 2020 and 2021 (unaudited) the Company received $2.6 million and $1.1 million, respectively, for acquisition costs from the reinsurers, pursuant to the existing reinsurance agreements. During the six months ended June 30, 2020 and 2021 (unaudited) the Company received $7.0 million and $4.7 million, respectively, for acquisition costs from the reinsurers, pursuant to the existing reinsurance agreements. This revenue is recorded in other revenue on the consolidated statements of operations.

The insurance company was not relieved of its primary obligations to policyholders as a result of any reinsurance agreements. The credit risk associated with the Company’s reinsurance contracts was mitigated by using a diverse group of reinsurers and monitoring their financial strength ratings. The former reinsurance counterparties and their A.M. Best financial strength ratings are as follows: Mapfre (A), Cincinnati (A+), Partner (A+), Horseshoe (not rated), and Topsail (not rated). For reinsurance counterparties not rated, adequate levels of collateral were required either in the form of a letter of credit or funded trust account.

The effect of the Company’s reinsurance agreements on premiums, loss and LAE related to the insurance company for the year ended December 31, 2020 and the six months ended June 30, 2021 (unaudited) is as follows (in thousands):

	December 31, 2020
	Premium			Premium			Unearned			Losses and LAE			Loss and LAE
	Written			Earned			Premium			Incurred			Reserves
Direct	$	100,611		$	99,712		$	16,070		$	74,943		$	57,093
Ceded		(85,504	)		(84,740	)		(13,668	)		(54,010	)		(33,941	)
Net	$	15,107		$	14,972		$	2,402		$	20,933		$	23,152

	June 30, 2021 (unaudited)
	Premium			Premium			Unearned		Losses and LAE			Loss and LAE
	Written			Earned			Premium		Incurred			Reserves
Direct	$	54,330		$	53,580		$	16,820	$	49,536		$	65,476
Ceded		(19,411	)		(33,080	)		-		(14,701	)		-
Net	$	34,919		$	20,500		$	16,820	$	34,835		$	65,476

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9. Notes Payable, net

The following table summarizes the Company’s debt outstanding, net of issuance costs (in thousands):

	December 31,			June 30,
	2020			2021
				(unaudited)
2019 Loan and Security Agreement	$	25,000		$	-
Subordinated Note Purchase and Security Agreement		32,461			-
Paycheck Protection Program Loan		5,880			-
Principal Amount Due		63,341			-
Less: Unamortized debt issuance costs and discounts		(11,407	)		-
Notes payable, net	$	51,934		$	-

Paycheck Protection Program Loan

In April 2020, the Company was granted a loan under the Paycheck Protection Program offered by the Small Business Administration under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), section 7(a)(36) of the Small Business Act for approximately $5,900,000. The loan was evidenced by a promissory note and bore interest at 1% with payments deferred for 10 months after the covered period of 24 weeks. Monthly payments of principal and interest of approximately $330,000 would have begun in September 2021 and continued through maturity in April 2022, if required. The loan was subject to partial or full forgiveness if the Company: used all proceeds for eligible purposes; maintained certain employment levels; and maintained certain compensation levels in accordance with and subject to the CARES Act and the rules, regulations and guidance. This loan was repaid in February 2021 and is no longer outstanding.

Subordinated Note Purchase and Security Agreement

In April 2020, the Company entered into that certain Note Purchase and Security Agreement (as amended, the “Note Purchase Agreement”) with us, as issuer, certain of our subsidiaries, as guarantors, and certain affiliates of Hudson Structured Capital Management (collectively, “Hudson”) with borrowings totaling $31.6 million through December 31, 2020 in the aggregate, along with $0.9 million of capitalized payment in kind (“PIK”) interest. The transaction further provided for additional funds up to $15.0 million over time, from Hudson, the timing of which was subject to reinsurance settlement timing. The outstanding principal under the Note Purchase Agreement was due in April 2025 and bore interest at the following rates: 2% per annum payable quarterly in arrears in cash, and a varying interest rate of 9.0% to 11.0% of PIK interest. The PIK interest was based on the aggregate outstanding principal balance as follows: (i) 11.0% if the outstanding balance was less than $5.0 million; (ii) 10.0% if the outstanding balance was greater than or equal to $5.0 million but less than $10.0 million; and (iii) 9.0% if the outstanding balance was greater than or equal to $10.0 million. PIK interest represents contractually deferred interest that is added to the principal balance outstanding and due at maturity. The loan was secured by substantially all assets of the Company. As of December 31, 2020, the outstanding principal and capitalized PIK interest on the Note Purchase Agreement was $32.5 million, along with $0.6 million of accrued PIK interest not subject to capitalization as of such date. The loan was able to be prepaid in an amount equal to the outstanding principal, accrued cash and PIK interest, and the end of term fee equal to 1% of the principal amount being prepaid. This loan was repaid in March 2021 and is no longer outstanding.

As part of the Note Purchase and Security Agreement, the Company issued warrants for up to 8,669,076 of Series E convertible preferred shares, which the Company estimated to have a fair value of $12.5 million at issuance which was recorded as a discount to the debt and was amortized to interest expense over the term of the debt. These warrants were exercised in February 2021 and are no longer outstanding.

2019 Loan and Security Agreement

In December 2019, the Company entered into a Loan and Security Agreement (the “2019 Loan and Security Agreement”) with a group of lenders for a term loan in the amount of $25.0 million. Minimum payments of interest were due monthly through December 2021. Beginning in January 2022, equal payments of principal would have been due monthly in an amount necessary to fully amortize the loan by June 5, 2024. An end of term payment of $0.6 million was due at maturity or date of any prepayment. At the time of origination, the lender was granted a warrant to purchase Series E convertible preferred stock, estimated to have a fair value of $0.5 million at issuance. The warrants were exercised in February 2021 and are no longer outstanding. The loan was secured by substantially all assets of the Company. The Company was required to obtain the lender’s consent regarding certain dispositions, and changes in business, management, or ownership including mergers and acquisitions, as more fully described in the 2019 Loan Agreement. The balance outstanding net of debt issuance costs for the 2019 Loan Agreement was $24.3 million as of December 31, 2020. The loan was prepaid in February 2021 and is no longer outstanding.

The loan was able to be prepaid in an amount equal to the outstanding principal, accrued interest, and the end of term fee, plus a prepayment charge of 3% if paid in the first year after the effective date, 2% if paid in the second year after the effective date, or 1% if prepaid after the second year subsequent to the effective date.

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10. Commitments

The Company leases facilities in San Francisco, California, which is the corporate headquarters, Tempe, Arizona and Boston, Massachusetts, as well as certain equipment. The leases are non-cancellable operating leases that expire on various dates through 2030.

Future minimum lease payments relating to these agreements as of June 30, 2021 (unaudited), are as follows (in thousands):

As of June 30, 2021 (unaudited)	Purchase Obligations		Leases		Total
2021 (remaining six months)	$	3,055	$	1,646	$	4,701
2022		-		3,093		3,093
2023		-		3,181		3,181
2024		-		3,190		3,190
2025		-		2,433		2,433
Thereafter		-		11,186		11,186
Total minimum lease payments	$	3,055	$	24,729	$	27,784

For the three months ended June 30, 2020 and 2021 (unaudited), rent expense was approximately $0.7 million. For the six months ended June 30, 2020 and 2021 (unaudited), rent expense was approximately $1.5 million and $1.4 million, respectively. It was included as part of other operating expenses on the Company’s consolidated statements of operations.

The Company was not a party to any material litigation, regulatory actions, or arbitration other than what is routinely encountered in claims activity and routine regulatory examinations, none of which is expected by the Company to have a materially adverse effect on the Company’s financial position or operations and/or cash flow as of December 31, 2020 and June 30, 2021 (unaudited).

11. Stockholders’ Equity

Common Stock

As of June 30, 2021, the Company had authorized a total of 640,000,000 shares for issuance as common stock. As of June 30, 2021, the Company had 126,727,134 shares of common stock issued and outstanding.

Preferred Stock

As of June 30, 2021, the Company had authorized a total of 10,000,000 shares for issuance as preferred stock. The Company’s board of directors has the authority to issue preferred stock and to determine the rights, privileges, preferences, restrictions, and voting rights of those shares. As of June 30, 2021, the Company had no shares of preferred stock outstanding.

12. Public and Private Warrants

As of June 30, 2021, the Company had 7,666,646 public warrants and 180,000 private placement warrants outstanding. Each whole warrant entitles the registered holder to purchase one share of common stock at a price of $11.50 per share, subject to adjustment, at any time commencing on September 8, 2021, which is the later of 30 days after the completion of the Business Combination or 12 months from INSU’s IPO closing date. The public warrants will expire on the fifth anniversary of the Business Combination, or earlier upon redemption or liquidation.

The Company may call the public warrants for redemption:

● in whole or in part;

● at a price of $0.01 per warrant;

● upon a minimum of 30 days’ prior written notice of redemption; and

● if, and only if, the last reported closing price of the ordinary shares equals of exceeds $18.00 per share for any 20 trading days within a 30-trading day period on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.

If the Company calls the public warrants for redemption, management will have the option to require all holders that wish to exercise the public warrants to do so on a “cashless basis,” as described in the warrant agreement.

The exercise price and number of shares of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a share dividend, recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of common stock at a price below its exercise price.

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13. Stock Option Plans

Restricted Stock Units (“RSUs”)

In 2021, we granted 4,985,044 restricted stock units (“RSUs”) under the 2021 Plan of which 1,252,929 RSUs were fully vested at the time of grant and vesting of 3,732,115 RSU grants is conditional based on continued employment or service for a specified period. Compensation cost related to RSU grants is recognized on a straight-line basis over the vesting period and is calculated using the closing price per share of our common stock on the grant date. For the three months and six months ended June 30, 2021, the Company recorded compensation expense of $7.8 million related to non performance based RSUs.

A summary of the Company’s RSUs as of June 30, 2021 (unaudited) is presented in the table below:

	Number of RSUs			Weighted-Average Fair Value
Balance at December 31, 2020		-		$	-
Granted		4,985,044			12.13
Vested		(1,684,348	)		10.78
Forfeited		-			-
Balance at June 30, 2020		3,300,696		$	12.82

As of June 30, 2021, there was $41.0 million of total unrecognized compensation cost related to RSUs. That cost is expected to be recognized over a weighted-average period of 2.81 years. The total grant date fair value of shares vested during the six months ended June 30, 2021 was $18.2 million.

Performance Based Awards

As of December 31, 2020, the Company had issued 150,000 outstanding performance-based awards (“PSUs”) to Dan Preston, Metromile’s Chief Executive Officer (“CEO”). As of the Closing, the performance-based provision was achieved for the outstanding performance-based awards as the Company completed a change in control event, and the Company recognized the expense related to these PSUs on the Closing date as there were no remaining vesting provisions. As a result, the Company recorded $2.5 million in stock-based compensation expense for the six months ended June 30, 2021.

In the six months ended June 30, 2021, the Company has issued 2,693,061 PSUs which each have a term of five years, subject to continuous services by each holder. One third of PSUs that vest are based on a specific number of policies in force achieved by the Company. One third of the PSUs that vest are based on the Company achieving positive operating cash flow for a period of at least one financial quarter. One third of the PSUs vest based on a market condition of the Company achieving a specific price per share for at least 20 days in a 30-day trading window. Once the performance targets are met, the PSUs that relate to the specific performance target vest immediately. As of June 30, 2021, the Company had recorded $1.0 million in expense from the PSUs related to the market condition. None of the performance conditions were probable of being satisfied as of June 30, 2021 and, therefore, there is no unrecognized stock compensation related to PSUs.

In the six months ended June 30, 2021, the Company granted separate tranches of PSU's subject to a Monte Carlo simulation. The following table provides a range of the assumptions for shares granted in 2021:

	2021
Expected volatility	65% - 70%
Expected term (years)	0.6 - 1.9
Expected dividend yield	n/a
Risk-free interest rate	0.3% - 0.6%

2011 Stock Plan

In 2011, the Company’s Board of Directors adopted the 2011 Equity Incentive Plan (the “2011 Plan”). The 2011 Plan provides for the granting of stock options to officers, directors, employees, and consultants of the Company. Options granted under the 2011 Plan may be Incentive Stock Options (“ISO”) or non-statutory Stock Options (“NSO”) as determined by the Board of Directors at the time of the option grant. The remaining unallocated shares reserved under the 2011 Plan were cancelled and no new awards will be granted under the 2011 Plan. Awards outstanding under the 2011 Plan were assumed by the Company upon the closing and continue to be governed by the terms of the 2011 Plan.

2021 Stock Plan

In connection with the Closing, the Company adopted the 2021 Equity Incentive Plan (the “2021 Plan”), under which 38,018,247 shares of common stock were initially reserved for issuance for ISOs. The 2021 Plan allows for the issuance of ISOs, NSOs, restricted stock awards, stock appreciation rights, restricted stock units (“RSUs”), and performance awards. The Board of Directors determines the period over which options become exercisable and options generally vest over a four-year period. The 2021 Plan became effective immediately following the closing.

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The Company uses the Black-Scholes option pricing model to estimate the fair value of each option grant on the date of grant or modification. The Company amortizes the estimated fair value to stock compensation expense using the straight-line method over the vesting period of the option. The following is a description of the significant assumptions used in the option pricing model:

● Expected term — The expected term is the period of time when granted options are expected to be outstanding. In determining the expected term of options, the Company utilized the midpoint between the vesting date and contractual expiration date.

● Volatility — Because the Company’s stock has limited trading history, the Company calculates volatility by using the historical stock prices of comparable public companies.

● Risk-free interest rate — The Company bases the risk-free interest rate used in the Black-Scholes option valuation model on the rate of treasury securities with the same term as the options.

● Forfeiture rate — The weighted average forfeiture rate of unvested options.

● Expected dividends — The Company does not have plans to pay cash dividends in the future. Therefore, the Company uses an expected dividend yield of zero in the Black-Scholes option valuation model.

The following assumptions were used to estimate the value of options granted during the year ended December 31, 2020 and the six months ended June 30, 2021 (unaudited):

	Year ended December 31, 2020
Forfeiture rate	19.62% - 25.76	%
Volatility	47.00% - 62.00	%
Expected term (years)	4.95-7.00
Risk-free interest rate	0.26% - 1.73	%
Expected dividends	-

	Six months ended June 30, 2021
Forfeiture rate		26.2	%
Volatility		62.00	%
Expected term (years)		5.33
Risk-free interest rate		0.53	%
Expected dividends		-

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Stock Option Activity

The following table summarizes the activity of the Company’s stock option plan:

						Weighted-
						Average
				Weighted-		Remaining		Aggregate
	Stock			Average		Contractual		Intrinsic
	Number of			Exercise		Term		Value
	Options			Price		(Years)		(in thousands)
Outstanding as of December 31, 2020		5,931,024		$	2.61		8.10	$	70,192
Options granted		4,231		$	14.45
Options exercised		(1,089,553	)	$	2.21
Options cancelled or expired and returned to plan		(1,808,157	)	$	2.17
Outstanding as of June 30, 2021		3,037,545		$	3.00		8.75	$	45,560
Vested and exercisable to vest as of June 30, 2021		423,342		$	2.96		8.50	$	6,367
Vested and expected as of June 30, 2021		2,034,446		$	2.99		8.62	$	30,533

The fair value of stock options granted are recognized as compensation expense in the consolidated statements of operations over the related vesting periods. The weighted-average grant date fair value per share of stock options granted during the six months ended June 30, 2021 (unaudited) was $7.69. As of June 30, 2021 (unaudited), there was approximately $2.6 million of unrecognized stock-based compensation cost related to stock options granted under the Plan, respectively, which is expected to be recognized over an average period of 2.47 years.

The following table illustrates stock-based compensation expense for employee and nonemployee RSUs and options for the six months ended June 30, 2020 and 2021 (unaudited) (in thousands).  

	Six Months Ended June 30,
	2020		2021
	(unaudited)
Cost of revenues	$	14	$	225
Research and development		236		630
Sales and marketing		3		139
Other operating expenses		302		11,027
Total stock-based compensation	$	555	$	12,021

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14. Income Taxes

The consolidated effective tax rate for the six months ended June 30, 2020 and 2021 (unaudited), was 0% and 0%, respectively. The main driver of the difference between the federal statutory tax rate of 21% and the effective tax rate for both periods was primarily related to a full valuation allowance against the deferred tax assets.

15. Segment and Geographic Information

The Company operates in the following two reportable segments, which are the same as its operating segments:

- Insurance Services. Providing insurance policies for automobile owners

- Enterprise Business Solutions. Providing access to its developed technology under SaaS arrangements along with professional services to third party customers.

Operating segments are based upon the nature of the Company’s business and how its business is managed. The Company’s Chief Operating Decision Maker (“CODM”) is its CEO. The CODM uses the Company’s operating segment financial information to evaluate segment performance and to allocate resources. The CODM does not evaluate the performance of the Company’s assets on a segment basis for internal management reporting and, therefore, such information is not presented.

Contribution is used, in part, to evaluate the performance of, and allocate resources to, each of the segments. Segment contribution is segment revenue less the related costs of revenue and sales and marketing expenses. It excludes certain operating expenses that are not allocated to segments because they are separately managed at the consolidated corporate level. These unallocated costs include stock-based compensation expense, research and development expenses, and general and administrative expenses such as legal and accounting.

The total assets of the Insurance services and Enterprise business solutions segments are $119.8 million and $5.0 million, respectively as of June 30, 2021. The consolidated total assets of Operating segments are $124.8 million as of June 30, 2021.

The following table summarizes the operating results of the Company’s reportable segments (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2020		2021			2020			2021
	(unaudited)					(unaudited)
Revenue:
Insurance services	$	5,887	$	26,988		$	13,943		$	43,216
Enterprise business solutions		1,831		1,110			2,465			2,158
Total revenue	$	7,718	$	28,098		$	16,408		$	45,374
Contribution:
Insurance services	$	4,813	$	(1,173	)	$	6,501		$	(3,036	)
Enterprise business solutions		392		(865	)		(170	)		(1,597	)
Total contribution	$	5,205	$	(2,038	)	$	6,331		$	(4,633	)

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The following table provides a reconciliation of the Company’s total reportable segments’ contribution to its total loss from operations (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2021			2020			2021
	(unaudited)						(unaudited)
Total segment contribution	$	5,205		$	(2,038	)	$	6,331		$	(4,633	)
Ceded premium, losses and LAE		4,064			(2,337	)		6,414			(5,242	)
Other income		470			180			798			1,327
Policy services expenses and other		813			1,692			1,799			2,063
Sales, marketing, and other acquisition costs		(424	)		25,716			3,388			72,883
Research and development		859			1,361			2,401			3,367
Amortization of capitalized software		2,799			2,701			5,496			5,352
Other operating expenses		3,965			16,729			9,216			25,311
Loss from operations	$	(7,341	)	$	(48,080	)	$	(23,181	)	$	(109,694	)

Geographical Breakdown of Direct Earned Premiums

Direct earned premium by state is as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2021		2020		2021
		(unaudited)				(unaudited)
California	$	13,015	$	16,334	$	27,606	$	31,480
Washington		2,611		3,379		5,324		6,364
New Jersey		2,046		2,749		4,243		5,208
Oregon		1,723		1,713		3,604		3,509
Illinois		1,054		1,019		2,202		2,060
Arizona		1,060		1,245		2,162		2,513
Pennsylvania		683		741		1,405		1,398
Virginia		398		578		825		1,048
Total premiums earned	$	22,590	$	27,758	$	47,371	$	53,580

During the three months ended June 30, 2020 and 2021 (unaudited), the Company recognized $1.8 million and $1.0 million of revenue earned from customers outside the United States, respectively. During the six months ended June 30, 2020 and 2021 (unaudited), the Company recognized $2.5 million and $2.0 million of revenue earned from customers outside the United States, respectively. Long-lived assets are all held in the U.S. For the three and six months ended June 30, 2020 and 2021 (unaudited), substantially all of the Company’s revenue was earned from customers residing in the United States.

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16. Net Loss per Share

Net loss per share calculations and potentially dilutive security amounts for all periods prior to the Merger have been retrospectively adjusted to the equivalent number of shares outstanding immediately after the Merger to effect the reverse recapitalization. Historically, reported weighted average shares outstanding have been multiplied by 1.01547844, which is the share exchange ratio established by the Merger Agreement.

The following table sets forth the computation of basic and diluted net loss per share attributable to our common stockholders:

	Three months ended June 30,						Six months ended June 30,
	2020			2021			2020			2021
Numerator:	(unaudited)						(unaudited)
Net loss attributable to common stockholders ($ in thousands)	$	(8,898	)	$	(41,260	)	$	(25,787	)	$	(144,887	)
Demoninator:
Weighted average common shares outstanding - basic and diluted		8,886,421			126,693,218			8,878,928			101,236,461
Net loss per share attributable to common stockholders - basic and diluted	$	(1.00	)	$	(0.33	)	$	(2.90	)	$	(1.43	)

As we have reported net loss for each of the periods presented, all potentially dilutive securities are antidilutive. The following potential outstanding shares of Common Stock were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been antidilutive:

	As of June 30,
	2020		2021
	(unaudited)
Convertible preferred stock		68,776,614		-
Outstanding stock options - Stock Plan		4,344,819		3,037,545
Warrants for preferred stock		869,942		-
Warrants for common stock		78,371		7,846,667
Restricted stock units		-		7,678,105
Total anti-dilutive securities		74,069,746		18,562,317

17. Related-Party Transactions

In August 2014, the Company loaned the CEO $0.4 million with interest at 3.09% and adjusted to 1.5% in April 2020, which was used to early exercise stock options issued to the CEO and was due at the earlier of one year after termination of employment, upon an Initial Public Offering or change in control, or ten years from the date issued. The loan was full recourse, and also collateralized by the underlying shares of common stock. For accounting under GAAP, the note receivable is presented as contra-equity in the accompanying consolidated balance sheets. This loan was paid in full in February 2021 and is no longer outstanding.

In March 2018, the Company entered into an agreement with a third party under which the Company developed proprietary software solutions and provides access to and use of such software solutions and related services. In July 2018, the third party became an investor of the Company as part of the Series E convertible preferred stock Financing. During the three months ended June 30, 2020 and June 30, 2021 (unaudited), the Company recognized $1.8 million and 1.0 million of revenue from the investor, respectively. During the six months ended June 30, 2020 and June 30, 2021 (unaudited), the Company recognized $2.5 million and $2.0 million of revenue from the investor, respectively. The Company had $0 million and $0.2 million in accounts receivable balances from the investor as of December 31, 2020 and June 30, 2021 (unaudited) respectively. The Company continues to enter into contracts with the investor related to the Company’s Enterprise business solutions (see Note 14, Segment and Geographic Information).

An executive of Hudson, who the Company entered into a Note Purchase and Security Agreement with in 2020 (see Note 9, Notes Payable, net), is on the Company’s Board of Directors. This loan was repaid in March 2021 and is no longer outstanding.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We started Metromile based on the simple observation that the physical world is being increasingly digitized, that this digital data can be used to better estimate the future, and that the best opportunity to create value for everyday customers in an increasingly predictable world is to reinvent insurance, one of the largest and most important global markets.

At its core, insurance financially protects the insured customer from the occurrence of specific future events. If these events can be more accurately estimated, using data and data science, then the insurance provided can be more accurately priced — lower likelihood events would cause the price of insurance to go down and higher likelihood events would cause the price of insurance to go up. The proliferation of sensor data, from cars, mobile phones, and elsewhere, means we have a greater ability to estimate the likelihood of future events and, thus, help many customers who are overpaying for insurance save money.

We founded Metromile in 2011 to realize this opportunity and tackle the broken auto insurance industry. With data science as our foundation, we offer our insurance customers real time, personalized auto insurance policies, priced and billed by the mile, with rates based on precisely how and how much they actually drive, instead of using the industry standard approximations and estimates that make prices unfair for most customers.

Through our digitally native offering, built around the needs of the modern driver, we believe our per-mile insurance policies save our customers, on average, 47% over what they were paying their previous auto insurer. We base this belief on data our customers self-reported in 2018 with respect to premiums paid to providers before switching to Metromile.

We believe the opportunity for our personalized per-mile insurance product is significant. Federal Highway Administration data indicates that approximately 35% of drivers drive more than half the total miles driven. We believe there is a correlation between the number of miles driven and the number of insurable losses. An October 2016 report by the Insurance Information Institute noted that the increase in claims frequency appears directly linked to the increase in the number of miles driven. Notwithstanding the relationship between miles driven and claims, auto insurance premiums have historically been priced based on a driver’s “class” — and drivers are charged the same basic premium rate as others in their class no matter the actual miles driven. In the traditional pricing model, a driver’s age, credit score, accident history, and geography influences the premium paid more than the actual miles driven. Thus, the 35% of drivers who account for more than half the total miles driven are not paying premiums based on how often they are behind the wheel and increasing the potential for an insurable loss claim. We believe the traditional pricing model is inherently unfair to the majority of drivers — the 65% of drivers who drive less than half the miles driven — as they are effectively subsidizing the minority of drivers who are high-mileage drivers. By offering auto insurance using a per-mile rate and then billing each customer monthly based on their actual miles driven, we are able to provide significant savings to the 65% of drivers who drive less than half the miles driven. Customers can simply use their connected car or use The Pulse to share their data with us — which includes miles driven, and in certain states where permitted by insurance regulators (four of the eight in which we currently operate), driving habits, such as phone use, speeding, hard-braking, accelerating, cornering, and location. Our customers are able to choose when and how to drive and share this information with us to realize these data driven savings every day.

The U.S. auto insurance market is massive, dominated by insurers stuck on legacy technology infrastructure who offer antiquated services. U.S. personal auto insurers write approximately $250 billion of premiums each year, with no carrier currently achieving more than 20% market share. We believe we are strategically positioned to succeed as industry incumbents struggle to meet the significant structural changes underway in an increasingly digital world. The advent of mobile phones has revolutionized modern mobility, while connected and autonomous technologies are drastically changing consumer relationships with vehicles. As we scale and accumulate more data, we believe that we can deliver increasingly better service, pricing and experiences for customers across all stages of the policy lifecycle.

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Our Model

The traditional auto insurance industry is focused on charging customers static insurance rates based on a “class” of driver, which is determined based on a set of variables that approximate and estimate risk. The traditional approach requires little ongoing customer engagement and requires manual claims servicing, which results in lower gross margins. In contrast, our model is digitally native, automated, and built using predictive models. Our product provides customized rates for each individual driver, using telematics data and proprietary predictive models to assess risk and determine pricing for each customer, while billing customers based on their actual miles driven. We have automated the claims approval process, resulting in higher margins, and reduced fraud rates through real-time reporting from telematics devices, resulting in lower loss ratios.

We have experienced strong growth since inception; however, our focus has been on prioritizing unit economics rather than solely focusing on revenue growth through increased net losses. Our priority has been on developing a durable business advantage.

Our gross profit/(loss), which is impacted by our reinsurance arrangements, increased from $(1.5) million for the three months ended June 30, 2020 to $(2.3) million for the three months ended June 30, 2021, and decreased from $(5.5) million for the six months ended June 30, 2020 to $(4.4) million for the six months ended June 30, 2021. Our accident period contribution profit/(loss), a non-GAAP financial measure that excludes the results of prior period development on loss and LAE, decreased from $6.5 million for the three months ended June 30, 2020 to $(0.9) million for the three months ended June 30, 2021, and decreased from $8.7 million for the six months ended June 30, 2020 to $1.0 million for the six months ended June 30, 2021, largely due to an increase in losses. Accident period refers to the period in which the loss occurs, and estimates are made to determine the ultimate expected cost of that loss. These estimates are reassessed each subsequent period, and the movement from the initial estimate of that accident period is known as prior period development. We view accident period contribution margin as the most relevant metric of current product profitability and use accident period contribution margin to consistently evaluate the variable contribution to our business from insurance operations from period to period based on the most current product profitability. Contribution profit/(loss), a non-GAAP financial measure that includes the results of prior period development on loss and LAE, decreased from $4.8 million for the three months ended June 30, 2020 to $(1.2) million for the three months ended June 30, 2021, and decreased from $6.5 million for the six months ended June 30, 2020 to $(3.0) million for the six months ended June 30, 2021 largely due to unfavorable prior period loss development. We use contribution profit/(loss) as a key measure of our progress towards profitability and to consistently evaluate the variable contribution to our business from insurance operations from period to period. See the section entitled “— Non-GAAP Financial Measures” for additional information regarding our use of accident period contribution profit/(loss) and contribution profit/(loss)and a reconciliation to the most comparable GAAP measure.

Reinsurance

We review our need to obtain reinsurance to help manage our exposure to property and casualty insurance risks

The reinsurance arrangement covering the periods May 1, 2017 to April 30, 2018 and May 1, 2018 to April 30, 2019 covered 85% of our renewal policies and beginning May 1, 2019, the reinsurance arrangements expanded to also include new policies. Thus, from May 1, 2019 through April 30, 2021, we ceded a larger percentage of our premium than in prior periods, resulting in a significant decrease in our revenues as reported under GAAP. In addition, under the reinsurance agreements from various years, LAE was ceded at a fixed rate ranging from 3% to 6% of ceded earned premium. In February 2021, we commuted 67% of our reinsurance program, resulting in 34.2% of the book being ceded as of March 2021. As of June 2021 we have commuted the remainder of our reinsurance programs to allow us to manage our surplus at the insurance carrier at a lower cost of capital. Going forward, and given the strength of our current balance sheet, we will continue to monitor our reinsurance needs, including new quota share arrangements, to maintain adequate capital levels at the insurance company level.

As we change our reinsurance arrangements, whereby the terms and structures may vary widely, our prior results, impacted by reinsurance, may not be a good indicator of future performance, including the fluctuations experienced in gross profit. Thus, we use accident period contribution profit/(loss) and contribution profit/(loss) as key measures of our performance.

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Key Performance Indicators

We regularly review key operating and financial performance indicators to evaluate our business, measure our performance, identify trends in our business, prepare financial projections and make strategic decisions. We believe these non-GAAP financial and operational measures are useful in evaluating our performance, in addition to our financial results prepared in accordance with GAAP. See the section entitled “— Non-GAAP Financial Measures” for additional information regarding our use of accident period contribution profit/(loss), contribution profit/(loss), accident period loss ratio and accident period LAE ratio and a reconciliation to the most comparable GAAP measures. 

The following table presents these metrics as of and for the periods presented:

	Three Months Ended June 30,						Six  Months Ended June  30,
	2020			2021			2020			2021
	($ in millions, except for Direct Earned Premium per Policy)						($ in millions, except for Direct Earned Premium per Policy)
Policies in Force (end of period)		93,117			95,314			93,117			95,314
Direct Earned Premium per Policy (annualized)	$	995		$	1,181		$	1,059		$	1,141
Direct Written Premium	$	21.7		$	26.3		$	48.3		$	54.3
Direct Earned Premium	$	22.6		$	27.8		$	47.4		$	53.6
Gross Profit/(Loss)	$	(1.5	)	$	(2.3	)	$	(5.5	)	$	(4.4	)
Gross Margin		(19.5	)%		(8.2	)%		(33.8	)%		(9.6	)%
Accident Period Contribution Profit/(Loss)	$	6.5		$	(0.9	)	$	8.7		$	1.0
Accident Period Contribution Margin		28.8	%		(3.3	)%		18.2	%		1.8	%
Contribution Profit/(Loss)	$	4.8		$	(1.2	)	$	6.5		$	(3.0	)
Contribution Margin		21.2	%		(4.2	)%		13.6	%		(5.6	)%
Direct Loss Ratio		52.4	%		78.7	%		59.5	%		78.6	%
Direct LAE Ratio		12.2	%		13.0	%		13.2	%		13.7	%
Accident Period Loss Ratio		49.8	%		74.2	%		58.9	%		70.5	%
Accident Period LAE Ratio		7.2	%		16.5	%		9.1	%		14.4	%

Policies in Force

We define policies in force as the number of current and active policyholders as of the period end date. We view policies in force as an important metric to assess our financial performance because policy growth drives our revenue growth, increases brand awareness and market penetration, generates additional data to continue to improve the performance of our platform, and provides key data to assist strategic decision making for our company. 

Direct Earned Premium per Policy 

We define direct earned premium per policy as the ratio of direct earned premium divided by the average policies in force for the period, presented on an annualized basis. We view premiums per policy as an important metric because it is a reliable indicator of revenue earned in any given period, and growth in this metric would be a clear indicator of the growth of the business. However, as evidenced by the substantial reduction in miles driven during the COVID-19 pandemic, near-term fluctuations in miles driven can lead to fluctuations in direct earned premium. Thus, we refer to policies in force as a more stable indicator of overall growth. Direct earned premium excludes the impact of premiums ceded to reinsurers such that it reflects the actual business volume and direct economic benefit generated from our customer acquisition efforts. Additionally, premiums ceded to reinsurers can change based on the type and mix of reinsurance structures we use.

Direct Written Premium 

We define direct written premium as the total amount of direct premiums on policies that were bound during the period. Direct written premium is a standard insurance metric and is included here for consistency. However, given that much of our premium is written and earned as customer miles are driven (i.e., customers are billed based on true use), unlike our competitors that write all premium up-front, we believe earned premium is a more meaningful comparison to other insurers. Direct written premium excludes mileage-based premium that has not yet been earned. It also excludes the impact of premiums ceded to reinsurers such that it reflects the actual business volume and direct economic benefit generated from our customer acquisition efforts. Additionally, premiums ceded to reinsurers can change based on the type and mix of reinsurance structures we use. 

Direct Earned Premium 

We define direct earned premium as the amount of direct premium that was earned during the period. Premiums are earned over the period in which insurance protection is provided, which is typically six months. We view direct earned premium as an important metric because it allows us to evaluate our growth prior to the impact of ceded premiums to our reinsurance partners. It is the primary driver of our consolidated GAAP revenues and represents the result of our sustained customer acquisition efforts. As with direct written premium, direct earned premium excludes the impact of premiums ceded to reinsurers to manage our business, and therefore should not be used as a substitute for net earned premium, total revenue, or any other measure presented in accordance with GAAP.

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Gross Profit/(Loss)

Gross profit/(loss) is defined as total revenue minus losses and LAE, policy servicing expense and other, and amortization of capitalized software. Gross margin is equal to gross profit/(loss) divided by total revenue. Gross profit/(loss) includes the effects of reinsurance, thereby increasing volatility of this measure without corresponding changes in the underlying business or operations.

Contribution Profit/(Loss) and Accident Period Contribution Profit/(Loss)  

Contribution profit/(loss), a non-GAAP financial measure, is defined as gross profit/(loss), excluding the effects of reinsurance arrangements on both total revenue and losses and LAE and excludes enterprise software revenues, investment income earned at the holding company, amortization of internally developed software, and devices, while including bad debt, report costs and other policy servicing expenses. Accident period contribution profit/(loss), a non-GAAP financial measure, further excludes the results of prior period development on losses and LAE. We believe the resulting calculations are inclusive of the variable costs of revenue incurred to successfully service a policy, but without the volatility of reinsurance. We use contribution profit/(loss) as a key measure of our progress towards profitability and to consistently evaluate the variable contribution to our business from insurance operations from period to period because it is the result of direct earned premiums, plus investment income earned at the insurance company, minus direct losses, direct LAE, premium taxes, bad debt, payment processing fees, data costs, underwriting reports, and other costs related to servicing policies. Accident period contribution profit/(loss) further excludes the results of prior period development on loss and LAE, thereby providing the most accurate view of the performance of our underlying insurance product, which drives our growth investment decisions and is a strong indicator of future loss performance.

See the section entitled “— Non-GAAP Financial Measures” for a reconciliation of total revenue to contribution profit/(loss) and accident period contribution profit/(loss). 

Contribution Margin and Accident Period Contribution Margin

Contribution margin, a non-GAAP financial measure, is defined as contribution profit/(loss) divided by adjusted revenue. Adjusted revenue, a non-GAAP financial measure, is defined as total revenue, excluding the net effect of our reinsurance arrangements, revenue attributable to our enterprise segment, interest income generated outside of our insurance company, and bad debt expense. We view contribution margin as an important metric because it most closely correlates to the economics of our core underlying insurance product and measures our progress towards profitability. Accordingly, we use this non-GAAP financial measure to consistently evaluate the variable contribution to our business from insurance operations from period to period. Accident period contribution margin, a non-GAAP financial measure, is defined as accident period contribution profit/(loss) divided by adjusted revenue. We view accident period contribution margin as an important metric as it excludes the results of prior period development on loss and LAE, thereby providing the most meaningful view of the performance of our current underlying insurance product, which drives our growth investment decisions and is a strong indicator of future loss performance.

See the section entitled “— Non-GAAP Financial Measures” for a reconciliation of total revenue to contribution profit/(loss) and accident period contribution profit/(loss).

Direct and Accident Period Loss Ratio 

We define direct loss ratio expressed as a percentage, as the ratio of direct losses to direct earned premium. Direct loss ratio excludes LAE. We view direct loss ratio as an important metric because it allows us to evaluate losses and LAE separately prior to the impact of reinsurance. 

We define accident period loss ratio as direct loss ratio excluding prior accident period development on losses. We view accident period loss ratio as an important metric because it allows us to evaluate the expected ultimate losses, including losses not yet reported, for the most recent accident period.

Direct and Accident Period LAE Ratio 

We define direct LAE ratio expressed as a percentage, as the ratio of direct LAE to direct earned premium. We view the direct LAE ratio as an important metric because it allows us to evaluate losses and LAE separately prior to the impact of reinsurance. We actively monitor the direct LAE ratio as it has a direct impact on our results regardless of our reinsurance strategy. 

We define the accident period LAE ratio as the direct LAE ratio excluding prior quarter development on LAE. We view accident period LAE ratio as an important metric because it allows us to evaluate the expected ultimate LAE, including LAE for claims not yet reported, for the most recent accident period.

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Recent Developments Affecting Comparability 

Business Combination with INSU

In February 2021, we completed the Merger, pursuant to which Metromile Operating Company (formerly MetroMile, Inc.) became our wholly owned direct subsidiary. The Merger was accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, although INSU was the legal acquirer, INSU is treated as the “acquired” company for financial reporting purposes and Metromile Operating Company is treated as the accounting acquirer. This determination was primarily based on the fact that Metromile Operating Company’s stockholders prior to the Merger have a majority of our voting power, Metromile Operating Company’s senior management now comprise substantially all of our senior management, the relative size of Metromile Operating Company compared to our company, and that Metromile Operating Company’s operations comprise our ongoing operations. Accordingly, for accounting purposes, the Merger is treated as the equivalent of a capital transaction in which Metromile Operating Company issued stock for our net assets, which are stated at historical cost, with no goodwill or other intangible assets recorded, and Metromile Operating Company’s financial statements became the Company’s financial statements.

In connection with the Business Combination, we received approximately $310.0 million of cash, which we used to repay certain indebtedness as described herein. We expect to use our cash on hand for working capital and general corporate purposes. We may also use the proceeds for the acquisition of, or investment in, technologies, solutions, or businesses that complement our business.

COVID-19 Impact 

In March 2020, the World Health Organization declared COVID-19 a global pandemic. We are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business. We have taken measures in response to the ongoing COVID-19 pandemic, including closing our offices and implementing a work from home policy for our nationwide workforce; implementing additional safety policies and procedures for our employees; and suspending employee travel and in-person meetings. We may take further actions that alter our business operations as may be required by federal, state, or local authorities or that we determine are in the best interests of our employees, customers, and stockholders. 

For the three months ended June 30, 2021, we generated $27.8 million in direct earned premium, an increase of $5.2 million or 22.9%, as compared to $22.6 million for the three months ended June 30, 2020. For the six months ended June 30, 2021, we generated $53.6 million in direct earned premium, an increase of $6.2 million or 13.1%, as compared to $47.4 million for the six months ended June 30, 2020. This increase in both reporting periods was primarily due to a year-over-year increase in direct earned premium per policy, which is a reflection of miles driven. Based on internal data, the average miles driven per policy increased by 20% for the first half of 2021 as compared to the same period in 2020. We believe that the potential long-term impacts of COVID-19, as more companies embrace work from home policies, represent an opportunity for us to increase our customer base as drivers continue to look for value-driven insurance solutions that provide the same or a better quality product that aligns to their own driving behaviors.

The future impact of the COVID-19 pandemic on our operational and financial performance will depend on certain developments, including the duration and spread of the pandemic, impact on our customers and their spending habits, impact on our marketing efforts, and effect on our suppliers, all of which are uncertain. Public and private sector policies and initiatives to reduce the transmission of COVID-19 and disruptions to our operations and the operations of our third-party suppliers, along with the related global slowdown in economic activity, may result in decreased revenues and increased costs. Impacts on our revenue and costs may continue through the duration of this crisis. It is possible that the COVID-19 pandemic, the measures taken by federal, state, or local authorities and businesses affected and the resulting economic impact may materially and adversely affect our business, results of operations, cash flows and financial positions as well as our customers.

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Key Factors and Trends Affecting our Operating Performance 

Our financial condition and results of operations have been, and will continue to be, affected by a number of factors, including the following: 

Our Ability to Attract New Customers 

Our long-term growth will depend, in large part, on our continued ability to attract new customers to our platform. Our growth strategy is centered around accelerating our existing position in markets that we already serve, expanding into new markets nationally across the United States, developing new strategic partnerships with key players in the automotive industry, and growing our enterprise software sales.

Our Ability to Retain Customers 

Turning our customers to lifetime customers is key to our success. We realize increasing value from each customer retained as a recurring revenue base, which forms a basis for organic growth for our new product offerings and improves our loss ratios over time. Our ability to retain customers will depend on a number of factors, including our customers’ satisfaction with our products, offerings of our competitors and pricing of our products. 

Our Ability to Expand Nationally Across the United States

Our long-term growth opportunity will benefit from our ability to provide insurance across more states in the United States. Today, we are licensed in 49 states and the District of Columbia, with licenses active in 46 states and the District of Columbia, and writing business in eight states. We plan to apply our highly scalable model nationally, with a tailored approach to each state, driven by the regulatory environment and local market dynamics. This will allow us to expand rapidly and efficiently across different geographies while maintaining a high level of control over the specific strategy within each state.

Our Ability to Introduce New and Innovative Products  

Our growth will depend on our ability to introduce new and innovative products that will drive the organic growth from our existing customer base as well as from potential customers. Our insurance offerings as well as our technology platform offered to enterprise customers provides us with a foundation to provide a broad set of insurance products to consumers in the future.

Our Ability to Manage Risk Through Our Technology  

Risk is managed through our technology, artificial intelligence, and data science, which we utilize to accurately determine the risk profiles of our customers. Our ability to manage risk is augmented over time as data is continuously collected and analyzed by our machine learning with the objective of lowering our loss ratios over time. Our success depends on our ability to adequately and competitively price risk.  

Components of Our Results of Operations 

Revenue 

Revenues are generated primarily from the sale of our pay-per-mile auto insurance policies within the United States, revenue related to policy acquisition costs recovered as part of the reinsurance arrangement, and through sales of our proprietary AI claims platform. Revenue excludes premiums ceded to our reinsurers (see the section entitled “— Reinsurance” for further information).

Premiums Earned, net 

Premiums earned, net represents the earned portion of our gross written premium, less the earned portion that is ceded to third-party reinsurers under any reinsurance agreements. Revenue from premiums is earned over the term of the policy, which is written for six-month terms. The premium for the policy provides for a base rate per month for the entire policy term upon the binding of the policy plus a per-mile rate multiplied by the miles driven each day (based on data from the telematics device, subject to a daily maximum).  

Investment Income 

Investment income represents interest earned from our fixed maturity and short-term investments less investment expenses and is recorded as the income is earned. Investment income is directly correlated with the size of our investment portfolio and with the market level of interest rates. The size of our investment portfolio is expected to increase in future periods, and therefore investment income is also expected to increase, as we continue to invest both customer premiums and equity proceeds into our investment portfolio.  

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Other Revenue 

Other revenue consists of enterprise revenue, revenue related to policy acquisition costs recovered as part of a reinsurance arrangement with reinsurance partners, reinsurance profit commissions based on performance of the ceded business, gain on reinsurance commutation and policy commissions earned from NGI. We have developed technologies intended for internal use to service our insurance business and have started offering our technologies to third-party insurance carriers. Enterprise revenue represents revenues generated from the licensing of such internally developed software on a subscription basis, and sales of our professional services, which includes customization and implementation services for customers. We also earned revenues from policy acquisition costs recovered for policies newly ceded to our reinsurance partners, and we earn commissions for policies underwritten by NGI prior to becoming a full-stack insurance carrier in 2016.  

Costs and Expenses 

Our costs and expenses consist of losses and LAE, policy servicing expense and other, sales, marketing, and other acquisition costs, research and development, amortization of capitalized software, and other operating expenses.  

Losses and LAE

Our losses and LAE consist of the net cost to settle claims submitted by our customers. Losses consist of claims paid, case reserves, as well as claims incurred but not reported, net of estimated recoveries from salvage and subrogation. LAE consists of costs borne at the time of investigating and settling a claim. Losses and LAE represents management’s best estimate of the ultimate net cost of all reported and unreported losses occurred through the balance sheet date. Estimates are made using individual case-basis valuations and statistical analyses and are continually reviewed and adjusted as necessary as experience develops or new information becomes known. These reserves are established to cover the estimated ultimate cost to settle insured losses.  

Both losses and LAE are net of amounts ceded to reinsurers. We evaluate whether to enter into reinsurance contracts to protect our business from losses due to concentration of risk and to manage our operating leverage ratios, as well as to provide additional capacity for growth. Our reinsurance contracts consist of quota-share reinsurance agreements with our reinsurance partners under which risks are covered on a pro-rata basis for all policies underwritten by us (see the section entitled “— Reinsurance” for further discussion). These expenses are a function of the size and term of the insurance policies we write and the loss experience associated with the underlying risks. Losses and LAE may be paid out over a period of years. 

Various other expenses incurred during claims processing are allocated to losses and LAE. These amounts include claims adjusters’ salaries and benefits, employee retirement plan related expenses and stock-based compensation expenses (Personnel Costs); software expenses; and overhead allocated based on headcount (Overhead). 

Policy Servicing Expense and Other 

Policy servicing expense and other includes personnel costs related to our technical operations and customer experience teams, data transmission costs, credit card and payment processing expenses, premium taxes, and amortization of telematic devices. Policy servicing expense and other is expensed as incurred.

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Sales, Marketing and Other Acquisition Costs 

Sales, marketing, and other acquisition costs includes spend related to advertising, branding, public relations, third-party marketing, consumer insights, reinsurance ceding commissions, and expense recognized due to return of onboarding allowance as part of reinsurance commutations. These expenses also include related personnel costs and overhead. We incur sales, marketing and other acquisition costs for all product offerings including our newly introduced software as a service (“SaaS”) platform which provides access to our developed technology under SaaS arrangements, along with professional services to third-party customers (“Enterprise business solutions”). Sales, marketing and other acquisition costs are expensed as incurred, except for costs related to deferred acquisition costs that are capitalized and subsequently amortized over the same period in which the related premiums are earned. We plan to continue investing in marketing to attract and acquire new customers, increase our brand awareness, and expand our Enterprise product offering. We expect that sales and marketing expenses will increase in absolute dollars in future periods and vary from period-to-period as a percentage of revenue in the near-term. We expect that, in the long-term, our sales, marketing and other acquisition costs will decrease as a percentage of revenue as the proportion of renewals to our total business increases. 

Research and Development

Research and development consist of costs that support our growth and expansion initiatives inclusive of website development costs, software development costs related to our mobile app and Enterprise business solution, and new product development costs. These costs include third-party services related to data infrastructure support; personnel costs and overhead for product design, engineering, and management; and amortization of internally developed software. Research and development costs are expensed as incurred, except for costs related to internally developed software that are capitalized and subsequently amortized over the expected useful life. We expect that research and development expenses will increase in both absolute dollars and percentage of revenues in future periods in the near-term. We expect that, in the long-term, our research and development expenses will decrease as a percentage of revenue as these represent largely fixed costs. 

Amortization of Capitalized Software 

Amortization of capitalized software relates to the amortization recorded for the capitalized website and software development costs for the period presented.

Other Operating Expenses 

Other operating expenses primarily relate to personnel costs and overhead for corporate functions, external professional service expenses and depreciation expense for computers, furniture, and other fixed assets. General and administrative expenses are expensed as incurred.

We expect to incur incremental operating expenses to support our global operational growth and enhancements to support our reporting and planning functions. 

We expect to incur significant additional operating expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and the listing standards of the Nasdaq Capital Market, additional corporate, director and officer insurance expenses, greater investor relations expenses and increased legal, audit and consulting fees. We also expect to increase the size of our accounting, finance, and legal teams to support our increased compliance requirements and the growth of our business. As a result, we expect that our other operating expenses will increase in absolute dollars and percentage of revenues in future periods in the near-term. We expect that, in the long-term, our other operating expenses will decrease as a percentage of revenue as these represent largely fixed costs. 

Interest expense 

Interest expense primarily relates to interest incurred on our long-term debt, the amortization of debt issuance costs.

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Increase in fair value of stock warrant liability

Increase in fair value of stock warrant liability primarily relates to changes in the fair value of warrant liabilities. 

Results of Operations 

Comparison of the Three Months Ended June 30, 2020 and June 30, 2021

The following table presents our consolidated statement of operations for the three months ended June 30, 2020 and 2021, and the dollar and percentage change between the two periods:

	Three Months Ended June 30,
	2020			2021			$ Change			% Change
	(unaudited)
Revenue
Premiums earned, net	$	2,794		$	18,049		$	15,255			546	%
Investment income		139			19			(120	)		(86	)%
Other revenue		4,785			10,030			5,245			110	%
Total revenue		7,718			28,098			20,380			264	%
Costs and expenses
Losses and loss adjustment expenses		2,366			22,640			20,274			857	%
Policy servicing expense and other		4,056			5,055			999			25	%
Sales, marketing and other acquisition costs		(300	)		25,926			26,226			(8,742	)%
Research and development		2,173			3,118			945			43	%
Amortization of capitalized software		2,799			2,701			(98	)		(4	)%
Other operating expenses		3,965			16,738			12,773			322	%
Total costs and expenses		15,059			76,178			61,119			406	%
Loss from operations		(7,341	)		(48,080	)		(40,739	)		555	%
Other expense
Interest expense and other		1,201			164			(1,037	)		(86	)%
Increase in fair value of stock warrant liability		356			(6,984	)		(7,340	)		(2,062	)%
Total other expense		1,557			(6,820	)		(8,377	)		(538	)%
Net loss before taxes		(8,898	)		(41,260	)		(32,362	)		364	%
Net loss after taxes	$	(8,898	)	$	(41,260	)	$	(32,362	)		364	%

Revenue

Premiums Earned, net

Net premiums earned increased $15.3 million, or 546%, from $2.8 million for the three months ended June 30, 2020 to $18.1 million for the three months ended June 30, 2021, which was primarily attributable to a $9.8 million decrease in premiums ceded to our reinsurance partners, a $5.2 million increase in direct earned premium, and a $0.3 million decrease in bad debt expense which was due primarily to state mandated COVID-19 payment extensions. Decrease of $9.8 million in premiums ceded to our reinsurance partners was driven largely by reinsurance commutation settlements. Direct earned premium increased by $5.2 million from $22.6 million for the three months ended June 30, 2020 to $27.8 million for the three months ended June 30, 2021. Increase in direct earned premiums was primarily attributable to an increase in policies in force during the three months ended June 30, 2021 as well as increase in miles driven during the same period. We believe direct earned premium is the best measure of top-line revenue, as it excludes the impacts of reinsurance.

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Investment Income

Investment income decreased $0.1 million, or 86%, from $0.1 million for the three months ended June 30, 2020 to $19,000 for the three months ended June 30, 2021. The decrease was primarily due to a lower balance of highly liquid fixed income investments during the three months ended June 30, 2021.

Other Revenue

Other revenue increased $5.2 million, or 110%, from $4.8 million for the three months ended June 30, 2020 to $10.0 million for the three months ended June 30, 2021. The increase was primarily attributable to an $8.1 million gain recognized on reinsurance commutation settlements, partially offset by $0.7 million decrease in revenues from new customer implementations of our Enterprise business solutions, and a $2.2 million decrease in revenues from policy acquisition costs recovered for policies onboarded into our reinsurance program. A substantial portion of Enterprise business solutions revenue was from one customer who was an investor and therefore a related party, as described in Note 17 of the unaudited consolidated financial statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q.

Costs and Expenses

Losses and LAE

Losses and LAE increased $20.3 million, or 857%, from $2.3 million for the three months ended June 30, 2020 to $22.6 million for the three months ended June 30, 2021. Ceded losses and LAE decreased $9.3 million as a result of commuting all of our reinsurance programs and thereby retaining more losses. Direct losses and LAE increased by $11.0 million due to an overall increase in claims cost, frequency, and severity.

Policy Servicing Expense and Other

Policy servicing expense and other increased $1.0 million, or 25%, from $4.0 million for the three months ended June 30, 2020 to $5.0 million for the three months ended June 30, 2021. The increase was primarily attributable to increase in our customer experience and other policy servicing personnel related expenses to support our growth objectives.

Sales, Marketing, and Other Acquisition Costs

Sales, marketing, and other acquisition costs increased $26.2 million, or 8,742%, from ($0.3) million for the three months ended June 30, 2020 to $25.9 million for the three months ended June 30, 2021. Of this increase, $20.1 million was reinsurance-related including the commutation settlement and the impact to the ceding commission offset. During the second quarter of 2021, we completed the restructuring of our reinsurance programs commuting all of the programs. As a result of the commutations, we recorded a gain of $8.1 million recorded in Other Revenue as well as Sales, Marketing, and Other Acquisition Cost expense of $17.6 million related to a return of revenues from policy acquisition costs recovered for policies onboarded into our reinsurance program. Additionally, as part of our typical marketing efforts, there was an increase of $5.7 million in both our online and offline marketing campaigns. This was increased by a $2.5 million less in reinsurance ceding commission which serves as an offset to sales and marketing expense. During the second quarter of 2020, reinsurance ceding commission which was driven by improved ceded loss ratio, resulting from the COVID-19 pandemic, exceeded sales, marketing and other acquisition expense incurred during the same period, resulting in a negative expense for the three-month period. For the six-month period, sales, marketing and other acquisition expenses incurred exceeded reinsurance ceding commission.

Research and Development

Research and development increased $0.9 million, or 43%, from $2.2 million for the three months ended June 30, 2020 to $3.1 million for the three months ended June 30, 2021. The increase was primarily attributable to increase in personnel related expenses to support our growth objectives.

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Amortization of Capitalized Software

Amortization of capitalized software decreased $0.1 million, or 4%, from $2.8 million for the three months ended June 30, 2020 to $2.7 million for the three months ended June 30, 2021. The decrease was primarily related to the amortization of our website development costs and capitalized costs related to internal use software.

Other Operating Expenses

Other operating expenses increased $12.8 million, or 322%, from $4.0 million for the three months ended June 30, 2020 to $16.8 million for the three months ended June 30, 2021. The increase was primarily driven by an increase of $8.0 million in director and officers’ stock-based compensation expense and a $4.8 million increase in general corporate overhead costs as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and the listing standards of the Nasdaq Capital Market, additional corporate, director and officer insurance expenses, and increased legal, audit and consulting fees.

Interest Expense

Interest expense decreased $1.0 million, or 86%, from $1.2 million for the three months ended June 30, 2020 to $0.2 million for the three months ended June 30, 2021. The decrease was primarily attributable to lower debt principal balance during the second quarter of 2021 as debt was paid off during the first quarter of 2021 and no outstanding debt remains on the balance sheet.

Decrease in fair value of stock warrant liability

Fair value of stock warrant liability decreased $7.3 million, from $0.4 million for the three months ended June 30, 2020 to ($6.9) million for the three months ended June 30, 2021. The decrease was primarily driven by the change in fair value of our preferred stock warrants issued in April 2020 and exercised in February 2021 and public and private placement warrants as described in Note 2 of the unaudited consolidated financial statements included in Part I, Item 1, of this Quarterly Report on form 10-Q.

Comparison of the six months ended June 30, 2020 and June 30, 2021

The following table presents our consolidated statement of operations for the six months ended June 30, 2020 and 2021, and the dollar and percentage change between the two periods:

	Six Months Ended June 30,
	2020			2021			$ Change			% Change
	(unaudited)
Revenue
Premiums earned, net	$	6,221		$	19,174		$	12,953			208	%
Investment income		419			55			(364	)		(87	)%
Other revenue		9,768			26,145			16,377			168	%
Total revenue		16,408			45,374			28,966			177	%
Costs and expenses
Losses and loss adjustment expenses		7,771			34,903			27,132			349	%
Policy servicing expense and other		8,684			9,498			814			9	%
Sales, marketing and other acquisition costs		3,588			73,220			69,632			1,941	%
Research and development		4,836			6,768			1,932			40	%
Amortization of capitalized software		5,496			5,352			(144	)		(3	)%
Other operating expenses		9,214			25,327			16,113			175	%
Total costs and expenses		39,589			155,068			115,479			292	%
Loss from operations		(23,181	)		(109,694	)		(86,513	)		373	%
Other expense
Interest expense and other		1,940			16,040			14,100			727	%
Increase in fair value of stock warrant liability		666			19,153			18,487			2,776	%
Total other expense		2,606			35,193			32,587			1,250	%
Net loss before taxes		(25,787	)		(144,887	)		(119,100	)		462	%
Net loss after taxes	$	(25,787	)	$	(144,887	)	$	(119,100	)		462	%

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Revenue

Premiums Earned, net

Net premiums earned increased $13.0 million, or 208%, from $6.2 million for the six months ended June 30, 2020 to $19.2 million for the six months ended June 30, 2021, which was primarily attributable to a $7.2 million decrease in premiums ceded to our reinsurance partners, a $6.2 million increase in direct earned premium, and a $0.5 million increase in bad debt expense which was due primarily to state mandated COVID-19 payment extensions. The decrease of $7.2 million in premiums ceded to our reinsurance partners was driven largely by reinsurance commutation settlements. Direct earned premium increased by $6.2 million from $47.4 million for the six months ended June 30, 2020 to $53.6 million for the six months ended June 30, 2021. The increase in direct earned premiums was primarily attributable to an increase in policies in force during the six months ended June 30, 2021 as well as increase in miles driven during the same period. We believe direct earned premium is the best measure of top-line revenue, as it excludes the impacts of reinsurance.

Investment Income

Investment income decreased $0.3 million, or 87%, from $0.4 million for the six months ended June 30, 2020 to $0.1 million for the six months ended June 30, 2021. The decrease was primarily due to a lower balance of highly liquid fixed income investments during the six months ended June 30, 2021.

Other Revenue

Other revenue increased $16.4 million, or 168%, from $9.8 million for the six months ended June 30, 2020 to $26.2 million for the six months ended June 30, 2021. The increase was primarily attributable to a $19.4 million gain recognized on reinsurance commutation settlement, partially offset by a $3.0 million decrease in revenues from policy acquisition costs recovered for policies onboarded into our reinsurance program and reinsurance profit commission. A substantial portion of Enterprise business solutions revenue was from one customer who was an investor and therefore a related party, as described in Note 17 of the unaudited consolidated financial statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q.

Costs and Expenses

Losses and LAE

Losses and LAE increased $27.1 million, or 349%, from $7.8 million for the six months ended June 30, 2020 to $34.9 million for the six months ended June 30, 2021. Ceded losses and LAE decreased $12.0 million as a result of commuting all of our reinsurance programs and thereby retaining more losses. Direct losses and LAE increased by $15.1 million, driven by an overall increase in claims costs due to an increase in claims severity observed industry-wide and a reserve adjustment.

Policy Servicing Expense and Other

Policy servicing expense and other increased $0.8 million, or 9%, from $8.7 million for the six months ended June 30, 2020 to $9.5 million for the six months ended June 30, 2021. The increase was primarily attributable to increase in our customer experience and other policy servicing personnel related expenses to support our growth objectives.

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Sales, Marketing, and Other Acquisition Costs

Sales, marketing, and other acquisition costs increased $69.6 million, or 1,941%, from $3.6 million for the six months ended June 30, 2020 to $73.2 million for the six months ended June 30, 2021. Of this increase, $62.2 million was reinsurance-related including the commutation settlement and impact to the ceding commission offset. During the six months ended June 30, 2021, we commuted all of our reinsurance programs. As a result of the commutations, we recorded a gain of $19.4 million recorded in Other Revenue as well as Sales, Marketing, and Other Acquisition Cost expense of $58.3 million related to a return of revenues from policy acquisition costs recovered for policies onboarded into our reinsurance program. Additionally, as part of our typical marketing efforts, there was an increase of $7.8 million in both our online and offline marketing campaigns. This was reduced by a $3.9 million less in reinsurance ceding commission which serves as an offset to sales and marketing expense. 

Research and Development

Research and development increased $1.9 million, or 40%, from $4.8 million for the six months ended June 30, 2020 to $6.7 million for the six months ended June 30, 2021. The increase was primarily attributable to a decrease of $2.0 million in capitalized software costs which serves as an offset to research and development expense.

Amortization of Capitalized Software

Amortization of capitalized software decreased $0.1 million, or 3%, from $5.5 million for the six months ended June 30, 2020 to $5.4 million for the six months ended June 30, 2021. The decrease was primarily related to the amortization of our website development costs and capitalized costs related to internal use software.

Other Operating Expenses

Other operating expenses increased $16.1 million, or 175%, from $9.2 million for the six months ended June 30, 2020 to $25.3 million for the six months ended June 30, 2021. The increase was primarily driven by an increase of $10.8 million in director’s, officers’, and employees’ stock-based compensation expense and a $2.3 million increase in general corporate overhead costs as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and the listing standards of the Nasdaq Capital Market, additional corporate, director and officer insurance expenses, and increased legal, audit and consulting fees.

Interest Expense

Interest expense increased $14.1 million, or 727%, from $1.9 million for the six months ended June 30, 2020 to $16.0 million for the six months ended June 30, 2021. The increase was primarily attributable to a $14.1 million non-recurring write off of unamortized debt issuance costs and debt prepayment fees related to debt payoff during the six months ended June 30, 2021 as described in Note 9 of the unaudited consolidated financial statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q. As of June 30, 2021, all debt had been repaid and no outstanding debt remains on the balance sheet.

Increase in fair value of stock warrant liability

Fair value of stock warrant liability increased $18.5 million, from $0.7 million for the six months ended June 30, 2020 to $19.2 million for the six months ended June 30, 2021. The increase was primarily driven by the change in fair value of our preferred stock warrants issued in April 2020 and exercised in February 2021 and public and private placement warrants as described in Note 2 of the unaudited consolidated financial statements included in Part I, Item 1, of this Quarterly Report on form 10-Q.

Non-GAAP Financial Measures

The non-GAAP financial measures below have not been calculated in accordance with GAAP, and should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute for, or superior to, GAAP results. In addition, accident period contribution profit/(loss) and contribution profit/(loss) should not be construed as indicators of our operating performance, liquidity or cash flows generated by operating, investing and financing activities, as there may be significant factors or trends that these non-GAAP measures fail to address. We caution investors that non-GAAP financial information, by its nature, departs from traditional accounting conventions. Therefore, its use can make it difficult to compare our current results with our results from other reporting periods and with the results of other companies.

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Our management use these non-GAAP financial measures, in conjunction with GAAP financial measures, as an integral part of managing our business and to, among other things: (1) monitor and evaluate the performance of our business operations and financial performance; (2) facilitate internal comparisons of the historical operating performance of our business operations; (3) facilitate external comparisons of the results of our overall business to the historical operating performance of other companies that may have different capital structures and debt levels; (4) review and assess the operating performance of our management team; (5) analyze and evaluate financial and strategic planning decisions regarding future operating investments; and (6) plan for and prepare future annual operating budgets and determine appropriate levels of operating investments.

The following table provides a reconciliation of total revenue to contribution profit/(loss) and accident period contribution profit/(loss) for the periods presented:

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2021			2020			2021
	($ in millions)						($ in millions)
Total revenue	$	7.7		$	28.1		$	16.4		$	45.4
Losses and LAE		(2.4	)		(22.6	)		(7.8	)		(34.9	)
Policy servicing expense and other		(4.0	)		(5.1	)		(8.6	)		(9.5	)
Amortization of capitalized software		(2.8	)		(2.7	)		(5.5	)		(5.4	)
Gross profit/(loss)		(1.5	)		(2.3	)		(5.5	)		(4.4	)
Gross margin		(19.5	)%		(8.2	)%		(33.8	)%		(9.6	)%
Less revenue adjustments
Revenue Adjustments Related to Reinsurance		16.3			0.6			33.1			9.5
Revenue from Enterprise Segment		(1.8	)		(1.1	)		(2.5	)		(2.2	)
Interest Income and Other		0.5			0.2			0.8			1.3
Less costs and expense adjustments
Loss and LAE Adjustments Related to Reinsurance		(12.2	)		(2.9	)		(26.7	)		(14.7	)
Loss and LAE Adjustments Related to Prior Period Development		1.7			0.3			2.2			4.0
Bad Debt, Report Costs and Other Expenses		(0.2	)		0.3			(0.2	)		(0.1	)
Amortization of Internally Developed Software		2.8			2.7			5.5			5.4
Devices		0.9			1.3			2.0			2.2
Accident period contribution profit/(loss)	$	6.5		$	(0.9	)	$	8.7		$	1.0
Prior Period Development	$	(1.7	)	$	(0.3	)	$	(2.2	)	$	(4.0	)
Contribution profit/(loss)	$	4.8		$	(1.2	)	$	6.5		$	(3.0	)
Total revenue	$	7.7		$	28.1		$	16.4		$	45.4
Revenue adjustments		15.0			(0.3	)		31.4			8.6
Adjusted revenue	$	22.7		$	27.8		$	47.8		$	54.0
Accident period contribution margin		28.8	%		(3.3	)%		18.2	%		1.8	%
Contribution margin		21.2	%		(4.2	)%		13.6	%		(5.6	)%

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Liquidity and Capital Resources

We are a holding company that transacts a majority of our business through operating subsidiaries. Through our insurance subsidiaries, we sell pay-per-mile auto insurance policies to customers and through our Enterprise subsidiary, we sell our insurance solution technology to third-party insurance carriers. From inception through completion of the Merger, we financed our operations primarily through sales of insurance policies, sales of our Enterprise platform, and the net proceeds received from the issuance of preferred stock, debt, and sales of investments. As of June 30, 2021, we had $202.6 million in cash and cash equivalents which includes $310.0 million received in cash from the trust account and the private placements in connection with the Closing in February 2021, compared to $19.2 million as of December 31, 2020. Our cash and cash equivalents primarily consist of bank deposits and money market funds. Our marketable securities consist of U.S. treasury securities, municipal securities, corporate debt securities, residential and commercial mortgage-backed securities, and other debt obligations.

Insurance companies in the United States are also required by state law to maintain a minimum level of capital and surplus. Insurance companies are subject to certain RBC requirements as specified by NAIC. These standards for property and casualty insurers are used as a means of monitoring the financial strength of insurance companies. Under these requirements, the amount of capital and surplus maintained by an insurance company is to be determined based on the various risk factors related to it. Such regulation is generally for the protection of the policyholders rather than stockholders. As of June 30, 2021 and December 31, 2020, our capital and policyholders’ surplus exceeded the minimum RBC requirements. We believe that our existing cash and cash equivalents, marketable securities, and cash flow from operations will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. Our future capital requirements will depend on many factors, including our insurance premium growth rate, renewal activity, including the timing and the amount of cash received from customers, the expansion of marketing activities, the timing and extent of spending to support development efforts, the introduction of new and enhanced products, the continuing market adoption of offerings on our platform, and the current uncertainty in the global markets resulting from the worldwide COVID-19 pandemic.

As part of our plans to restructure our reinsurance program and ensure the insurance carrier is adequately capitalized, approximately $55.2 million moved from unrestricted to restricted cash in the first and second quarter of 2021, a portion of which was used for reinsurance commutation settlements.

The following table summarizes our cash flow data for the periods presented:

	Six Months Ended June 30,
	2020			2021
	($ in millions)
Net cash used in operating activities	$	(23.0	)		(47.5	)
Net cash provided by investing activities		22.0			(32.2	)
Net cash provided by financing activities		25.9			273.5

Operating Activities

Net cash used in operating activities for the six months ended June 30, 2021 was $47.5 million, which was an increase of net cash used of $24.5 million from $23.0 million for the six months ended June 30, 2020. Cash used during this period included $89.3 million from net loss for the six months ended June 30, 2021, excluding the impact of changes in fair value of our outstanding warrants, depreciation expense and stock-based compensation and other non-cash expenses. Net cash provided by changes in our operating assets and liabilities increased by $49.4 million, which is primarily attributable to ceded reinsurance premiums, reinsurance recoverable on unpaid losses, accounts payable and accrued expense, prepaid reinsurance premium, premiums receivable which outpaced reinsurance recoverable on paid losses, prepaid expenses and other, unearned premium reserve, and loss and LAE reserves.

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Net cash used in operating activities for the six months ended June 30, 2020 was $23.0 million. Cash used during this period included $15.3 million from net loss for the six months ended June 30, 2020, excluding the non-cash impacts from depreciation, stock-based compensation, and other non-cash items. Net cash used due to changes in operating assets and liabilities primarily consisted of increases in ceded reinsurance premium payable, loss and LAE reserves, other liabilities, and unearned premium reserves which outpaced the growth of premiums and accounts receivable, reinsurance recoverable and accounts payable. The increase in cash used in operating activities from the six months ended June 30, 2021 compared to the six months ended June 30, 2020 was primarily due to a reinsurance commutation settlement, as well as an increase in corporate overhead costs.

Investing Activities

Net cash used in investing activities for the six months ended June 30, 2021 was $32.2 compared to $22.0 million in net cash provided by investing activities during the three months ended June 30, 2020, which was primarily driven by purchases and maturities of marketable securities offset by our continued investment in telematics devices, leasehold improvements, and other equipment, as well as continued investment in our website and software development.

Financing Activities

Net cash provided by financing activities for the six months ended June 30, 2021 was $273.5 million compared to $25.9 million in cash provided by financing activities for the six months ended June 30, 2020. The increase in cash provided by financing activities is primarily due to cash received from the trust account and the private placements in connection with the Closing in February 2021.

Contractual Obligations

The following is a summary of material contractual obligations and commitments as of June 30, 2021:

	Total		2021 (remaining six months)		2022 – 2023		2024 – 2025		Thereafter
	(in millions)
Long-term debt	$	-	$	-	$	-	$	-	$	-
Interest on long-term debt		-		-		-		-		-
Operating Leases		24.7		1.6		6.3		5.6		11.2
Purchase Commitments		3.1		3.1		-		-		-
Total	$	27.8	$	4.7	$	6.3	$	5.6	$	11.2

Financing Arrangements

Subordinated Note Purchase and Security Agreement

In April 2020, we entered into the Note Purchase Agreement with Hudson, which was amended in February 2021 to reflect the consummation of the Merger by adding INSU as a guarantor and reflecting our new corporate structure. An executive of Hudson is on our board of directors and is a related party, as discussed in Note 17 of the unaudited consolidated financial statements included in Part I, Item 1, of this Quarterly Report on form 10-Q.

Under the Note Purchase Agreement, we could issue up to $50.0 million in aggregate principal amount of senior secured subordinated PIK notes due in 2025 (the “Notes”). The Note Purchase Agreement further provided for additional funds of up to an aggregate of $15.0 million over time from Hudson, the timing of which was subject to reinsurance settlement timing. Notes issued under the Note Purchase Agreement were due on the fifth anniversary of their issuance, starting in April 2025, and bore interest at the following rates: 2% per annum payable quarterly in arrears in cash, and a varying interest rate of 9.0% to 11.0% PIK interest. The PIK interest was based on the aggregate outstanding principal balance as follows: (i) 11.0% if the outstanding balance was less than $5.0 million; (ii) 10.0% if the outstanding balance was greater than or equal to $5.0 million but less than $10.0 million, and (iii) 9.0% if the outstanding balance was greater than or equal to $10.0 million. PIK interest represents contractually deferred interest that was added to the principal balance outstanding each quarter and due at maturity. The Notes were secured by substantially all of our assets. We had the right to prepay the Notes at any time subject to payment of a fee. As of December 31, 2020, $31.6 million aggregate principal amount of the Notes was outstanding, along with $0.9 million of capitalized PIK interest. Subsequent to December 31, 2020, we issued additional Notes having an aggregate principal amount of $2.0 million. As of March 30, 2021, there was approximately $36.6 million of principal and PIK interest outstanding under the Hudson debt facility, which we repaid on such date, along with the prepayment fee of $0.4 million. Accordingly, there are no longer any Notes outstanding.

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As part of the entry into the original Note Purchase Agreement, we issued warrants for up to 8,536,938 of Series E convertible preferred shares, which we estimated to have a fair value of $12.5 million at issuance, which was recorded as a discount to the debt and is being amortized to interest expense over the term of the debt. These warrants were net exercised immediately prior to the Effective Time (as defined in the Merger Agreement) and are no longer outstanding.

Paycheck Protection Program Loan

In April 2020, we were granted a loan under the Paycheck Protection Program offered by the Small Business Administration under the CARES Act, section 7(a)(36) of the Small Business Act for approximately $5.9 million. The balance outstanding for the Paycheck Protection Program loan was $5.9 million at December 31, 2020. We repaid this loan concurrent with the consummation of the Merger and it is no longer outstanding.

2019 Loan and Security Agreement

In December 2019, we entered into a Loan and Security Agreement (the “2019 Loan and Security Agreement”) with us, as borrower, certain of our subsidiaries, as guarantors and certain affiliates of Multiplier Capital, LLC and other financial institutions, as lenders and agent, providing for a term loan in aggregate principal amount of $25.0 million. Minimum payments of interest were due monthly through December 2021. Beginning in January 2022, equal payments of principal would have been due monthly in an amount necessary to fully amortize the loan by June 5, 2024. An end of term payment of $0.6 million was due at maturity or date of any prepayment. The loan was secured by substantially all of our and the guarantor’s assets. Lender’s consent was required to be obtained regarding certain dispositions, and changes in business, management, or ownership including mergers and acquisitions, such as the Merger, as more fully described in the 2019 Loan and Security Agreement. The balance outstanding net of debt issuance costs for the 2019 Loan and Security Agreement was $24.3 million as of December 31, 2020.

The loan could be prepaid in an amount equal to the outstanding principal, accrued interest, and the end of term fee, plus a prepayment charge of 3% if paid in the first two years after the effective date, 2% if paid in the third year after the effective date, or 1% if prepaid after the third year subsequent to the effective date. Accordingly, we prepaid this loan in connection with the consummation of the Merger and is no longer outstanding.

At the time of origination, the lender was granted a warrant to purchase Series E convertible preferred stock, estimated to have a fair value of $0.5 million at issuance. These warrants were net exercised immediately prior to the Effective Time and are no longer outstanding.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, results of operations, liquidity or cash flows.

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Critical Accounting Policies and Estimates

Our financial statements are prepared in accordance with GAAP. The preparation of the consolidated financial statements in conformity with GAAP requires our management to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the period. We evaluate our significant estimates on an ongoing basis, including, but not limited to, estimates related to reserves for loss and LAE, premium write-offs, and stock-based compensation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

See Note 1, Summary of Significant Accounting Policies, to our unaudited consolidated financial statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q for material changes to our critical accounting policies from the ones described under the section Critical Accounting Policies and Estimates of Management’s Discussion and Analysis of Financial Condition and Results of Operations and Summary of Significant Accounting Policies in the notes to the audited consolidated financial statements which are which are included in the Company’s Post-Effective Amendment No. 1 to Form S-1 filed with the SEC on August 9, 2021.

New Accounting Pronouncements

See Note 1, Summary of Significant Accounting Policies, to our unaudited consolidated financial statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

We are exposed to certain credit and interest rate risks as part of our ongoing business operations.

Credit Risk

We are exposed to credit risk on our investment portfolio and were exposed on our reinsurance contracts. Investments that potentially subject us to credit risk consist principally of cash and marketable securities. We place our cash and cash equivalents with financial institutions with high credit standing and our excess cash in marketable investment grade securities. With respect to our reinsurance contracts, we were exposed to credit risk from reinsurance recoverables and prepaid reinsurance premiums, which was mitigated by using a diverse group of reinsurers and monitoring their financial strength ratings. For any reinsurance counterparties who were not rated, we require adequate levels of collateral in the form of a trust account or Letter of Credit. The credit risk on our reinsurance contracts has been eliminated with the commutation of the reinsurance programs.

Interest Rate Risk

Our consolidated balance sheets include assets and liabilities with estimated fair values that are subject to market risks. Our primary market risk has been interest rate risks which impacts the fair value of our liabilities as well as interest rate risks associated with our investments in fixed maturities.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Because there are inherent limitations in all control systems, a control system, no matter how well conceived and operated, can provide only reasonable, as opposed to absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

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Our management, with the participation of our Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of the end of the period covered by this report solely due to the material weakness in our internal control over financial reporting due to the insufficient risk assessment of the underlying accounting treatment for certain complex financial instruments, as described below.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

On April 12, 2021, the Acting Director of the Division of Corporate Finance and the Acting Chief Accountant of the SEC issued “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies” (the “Statement”). The Statement indicated that when certain features are included in warrants issued in special purpose acquisition company (“SPAC”) transactions, the warrant “should be classified as a liability measured at fair value, with changes in fair value each period reported in earnings.” Management analyzed and evaluated INSU’s financial statements previously filed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 and concluded that there was a material misstatement related to the accounting for complex financial instruments in the historical financial statements of INSU for the year ended December 31, 2020. We have filed a Current Report on Form 8-K under Item 4.02 that includes a statement of non-reliance on such historical financial statements and filed an Amendment No. 1 to Annual Report on Form 10-K/A for the year ended December 31, 2020 with the SEC on June 2, 2021.

Prior to the issuance of the Statement, management had concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period covered by the Annual Report on Form 10-K filed with the SEC on March 31, 2021. However, in response to the guidance in the Statement, management re-evaluated INSU’s disclosure controls and procedures as of December 31, 2020 and concluded that INSU’s disclosure controls and procedures were not effective at the reasonable assurance level as of December 31, 2020 due to a material weakness in internal control over financial reporting due to the insufficient risk assessment of the underlying accounting treatment for certain complex financial instruments.

Our evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q included consideration of the guidance set forth in the Statement. Based on the items discussed in the Statement, our Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2021, we did not design and maintain effective controls over financial reporting relating to the accounting treatment for complex financial instruments, as discussed above.

Notwithstanding this material weakness, management has concluded that our financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in accordance with GAAP.

Remediation Plan

We are taking steps to remediate the material weakness by, among other things, devoting significant effort and resources to the remediation and improvement of our internal control over financial reporting as it relates to the accounting treatment for complex financial instruments. We have enhanced these processes to better evaluate our research and understanding of the nuances of the complex accounting standards that apply to our securities and financial statements. We have provided enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. These actions are subject to ongoing review by senior management and Audit Committee oversight. As we continue to evaluate and work to improve our internal control over financial reporting, management may implement additional measures to address the material weakness or modify the remediation efforts described above and will continue to review and make necessary changes to the overall design of our internal controls. The weakness will not be considered remediated, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

Changes in Internal Control over Financial Reporting

During the three months ended June 30, 2021, there were no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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PART II

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are involved in various legal proceedings arising from the normal course of business activities, some of which, to date, have related to insurance claims made against us. Other than as described below, our management believes that there are currently no extra contractual or non-claim related litigation the outcome of which, we believe, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, cash flows or financial condition.

ITEM 1A. RISK FACTORS

RISK FACTORS

Investing in our securities involves risks. Before you make a decision to buy our securities, in addition to the risks and uncertainties discussed under the heading “Cautionary Note Regarding Forward-Looking Statements,” in this Quarterly Report on Form 10-Q, you should carefully consider the specific risks set forth herein. If any of these risks actually occur, it may materially harm our business, financial condition, liquidity and results of operations. As a result, the market price of our securities could decline, and you could lose all or part of your investment. Additionally, the risks and uncertainties described in this Quarterly Report on Form 10-Q are not the only risks and uncertainties that we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may become material and adversely affect our business.

We have marked with an asterisk (*) those risks described below that reflect substantive changes from, or additions to, the risks described in our Amendment No. 1 to Annual Report on Form 10-K/A for the year ended December 31, 2020 with the SEC on June 2, 2021.

Risks Related to Our Business

We have a history of net losses and could continue to incur substantial net losses in the future.*

We have incurred recurring losses on an annual basis since our incorporation in 2011. We incurred net losses of $120.1 million and $41.3 million for the year ended December 31, 2020, and the three months ended June 30, 2021, respectively. We had an accumulated deficit of $366.6 million and $511.5 million  as of December 31, 2020, and June 30, 2021, respectively.

The principal driver of our losses to date is our insured losses paid associated with accidents and other insured events by our customers. Establishing adequate premium rates is necessary to generate sufficient revenue to offset losses, LAE and other costs. If we do not accurately assess the risks that we underwrite, the premiums that we charge may not be adequate to cover our losses and expenses, which would adversely affect our results of operations and our profitability. Moreover, as we continue to invest in our business, we expect expenses to continue to increase in the near term. Such expenses may occur in the areas of telematics, digital marketing, brand advertising, consumer-facing technologies, core insurance operations services and lines of business not presently offered by Metromile. These investments may not result in increased revenue or growth in our business. If we fail to manage our losses or to grow our revenue sufficiently to keep pace with our investments and other expenses, our business will be seriously harmed.

In addition, we will incur additional expenses to support our growth. As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. We may encounter unforeseen or unpredictable factors, including unforeseen operating expenses, complications or delays, which may also result in increased costs. Further, it is difficult to predict the size and growth rate of our market or demand for our services and success of current or potential future competitors. As a result, we may not achieve or maintain profitability in future periods.

We may lose existing customers or fail to acquire new customers.

We believe that growth of our business and revenue depends upon our ability to continue to grow our business in the geographic markets that we currently serve by retaining our existing customers and adding new customers in our current as well as new geographic markets. Expanding into new geographic markets takes time, requires us to navigate and comply with extensive regulations and may occur more slowly than we expect or than it has occurred in the past. If we lose customers, our value will diminish. In particular, while loss performance has improved over time as more customers renew their policies and remain policyholders for longer, a future loss of customers could lead to higher loss ratios or loss ratios that cease to decline, which would adversely impact our profitability. If we fail to remain competitive on customer experience, pricing, and insurance coverage options, our ability to grow our business may also be adversely affected. In addition, we may fail to accurately predict risk segmentation of new customers or potential customers, which could also reduce our profitability.

While a key part of our business strategy is to retain and add customers in our existing markets and into our current product offerings, we also intend to expand our operations into new markets and new product offerings. In doing so, we may incur losses or otherwise fail to enter new markets or offer new products successfully. Our expansion into new markets and product offerings may place us in unfamiliar competitive environments and involve various risks, including competition, government regulation, the need to invest significant resources and the possibility that returns on such investments will not be achieved for several years or at all.

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There are many factors that could negatively affect our ability to grow our customer base, including if:

● we lose customers to new market entrants and/or existing competitors;

● we do not obtain regulatory approvals necessary for expansion into new markets or in relation to our products (such as underwriting and rating requirements);

● we fail to effectively use search engines, social media platforms, digital app stores, content-based online advertising, and other current and emerging online sources for generating traffic to our website and our mobile app;

● our digital platform experiences disruptions;

● we suffer reputational harm to our brand including from negative publicity, whether accurate or inaccurate;

● we fail to expand geographically;

● we fail to offer new and competitive products, to provide effective updates to our existing products or to keep pace with technological improvements in our industry;

● customers have difficulty installing, updating or otherwise accessing our app or website on mobile devices or web browsers as a result of actions by us or third parties;

● customers prefer less technological solutions or are unable or unwilling to adopt or embrace new technology;

● the perception emerges that purchasing insurance products online is not as effective as purchasing those products through traditional offline methods;

● technical or other problems frustrate the customer experience, particularly if those problems prevent us from generating quotes or paying claims in a fast and reliable manner; or

● we are unable to address customer concerns regarding the content, privacy, and security of our digital platform.

Our inability to overcome these challenges could impair our ability to attract new customers and retain existing customers, and could have a material adverse effect on our business, operating results and financial condition.

We may require additional capital to support business growth or to satisfy our regulatory capital and surplus requirements, and this capital might not be available on acceptable terms, if at all.

We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to develop new features and products or enhance our existing products and services, satisfy our regulatory capital and surplus requirements, cover losses, improve our operating infrastructure or acquire complementary businesses and technologies. Many factors will affect our capital needs as well as their amount and timing, including our growth and profitability, regulatory requirements, market disruptions and other developments. If our present capital and surplus is insufficient to meet our current or future operating requirements, including regulatory capital and surplus requirements, or to cover losses, we may need to raise additional funds through financings or curtail our growth. We evaluate financing opportunities from time to time, and our ability to obtain financing will depend, among other things, on our development efforts, business plans and operating performance, as well as the condition of the capital markets at the time we seek financing. We cannot be certain that additional financing will be available to us on favorable terms, or at all.

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If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our Common Stock. As an insurance company, we are subject to extensive laws and regulations in every jurisdiction in which we conduct business, and any such issuances of equity or convertible debt securities to secure additional funds may be impeded by regulatory approvals or requirements imposed by such regulatory authorities if such issuances were deemed to result in a person acquiring “control” of our company under applicable insurance laws and regulations. Such regulatory requirements may require potential investors to disclose their organizational structure and detailed financial statements as well as require managing partners, directors and/or senior officers submit biographical affidavits which may deter funds from investing in our company. Moreover, any debt financing, in addition to our outstanding credit facilities, that we secure in the future could subject us to restrictive covenants relating to our capital raising activities, our ability to make certain types of investments or payments, and other financial and operational matters, which may increase our difficulty to obtain additional capital or to pursue business opportunities, including new product offerings and potential acquisitions. We may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be impaired, and our business, revenue, results of operations and financial condition may be materially harmed.

Further, we are restricted by covenants in our credit agreements. These covenants restrict, among other things, our ability to incur additional debt without lender consent or grant liens over our assets, which may limit our ability to obtain additional funds.

The COVID-19 pandemic has caused disruption to our operations and may negatively impact our business, key metrics, and results of operations in numerous ways that remain unpredictable.

Our business has been and may continue to be impacted by the effects of the outbreak COVID-19, which was declared a global pandemic in March 2020. This pandemic and related measures taken to contain the spread of COVID-19, such as government-mandated business closures, orders to “shelter in place” (“SIPs”) and travel and transportation restrictions, have negatively affected the U.S. and global economies, disrupted global supply chains, and led to unprecedented levels of unemployment. Beginning in the second quarter of 2020, our business was favorably impacted by the SIPs as our customers drove less. While our premiums collected declined due to per-mile billing, we had a corresponding material decline in incurred losses. Our business has also been impacted by certain state regulations related to COVID-19 relief efforts, including restrictions on the ability to cancel policies for non-payment, requiring deferral of insurance premium payments for up to 60 days and restrictions on increasing policy premiums. We continue to assess and update our business continuity plans in the context of this pandemic, including taking steps in an effort to help keep our employees healthy and safe. The spread of COVID-19 has caused us to modify our business practices (including employee travel, employee work locations in certain cases, and cancellation of physical participation in meetings, events, and conferences), and we expect to take further actions as may be required or recommended by government authorities or as we determine are in the best interests of our employees and customers. Furthermore, COVID-19 has impacted and may further impact the broader economies of affected countries, including negatively impacting economic growth, the proper functioning of financial and capital markets, foreign currency exchange rates, and interest rates. It is possible that the pandemic will cause an economic slowdown of potentially extended duration, as well as a global recession. This could result in an increase in costs associated with claims under our policies, as well as an increase in the number of customers experiencing difficulty paying premiums, any of which could have a material adverse effect on our business and results of operations. It is also possible that working from home or other remote work arrangements adopted during the SIPs become permanent on a widespread basis, thereby resulting in further reduction in premiums collected due to per-mile billing, or a permanent reduced need for auto insurance. Furthermore, due to COVID-19’s negative impact on driving, regulators in many states continue to mandate or request that auto insurance companies refund a portion of their premium to their policyholders to reflect the insurer’s decrease in projected loss exposure due to the virus. In all of the states in which we operate, state insurance regulators have either encouraged, strongly suggested or mandated insurers to provide COVID-19-related consumer relief. Regulators in several states in which we operate or into which we plan to expand placed a mandatory moratorium on non-pay cancellations and could revive, add to, extend, or expand the scope of such moratoriums, providing consumers grace periods ranging from 60 days to indefinite (based on the term of emergency orders) in duration, during which premium did not need to be paid in a timely fashion. These moratoriums resulted in an increase of premium write-offs from 1.9% for the year ending December 31, 2019 to 2.4% for the year ending December 31, 2020. Premium write-offs have been immaterial to date, but could be significant in the future. There were still several states with bulletins effective after December 31, 2020, and depending on the unpredictable nature of the pandemic and SIPs such moratoriums could be revived, added to, or extended. These mandates and similar regulations or suggestions could negatively impact our ability to charge or increase premiums to adequately cover our losses and could result in continued increased premium write-offs.

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Though we continue to monitor the COVID-19 pandemic closely, due to the speed with which it continues to develop, the global breadth of its spread, the range of governmental and community reactions thereto and the unknown timing or effectiveness of any vaccine or treatment, there is considerable uncertainty around its duration and ultimate impact. The impact of the pandemic may also exacerbate the other risks described in these Risk Factors, and additional impacts may arise that we are not currently aware of, any of which could have a material effect on us. In addition, if there is a future resurgence of COVID-19, these negative impacts on our business may be further exacerbated. As a result, the full extent of the impact of the pandemic on our overall financial and operating results, whether in the near or long term, cannot be reasonably estimated at this time.

Our future growth and profitability depend in part on our ability to successfully operate in an insurance industry that is highly competitive.

Many of our primary competitors have well-established national brands and market similar products. Our competitors include large national insurance companies as well as up-and-coming companies. Several of these established national insurance companies are larger than us and have significant competitive advantages, including better name recognition, strong financial ratings, greater resources, easier access to capital, and offer more types of insurance than we do, such as homeowners and renters, which are often bundled together to help attract and retain customers. Our business model and technology is also still nascent compared to the established business models of the well-established incumbents in the insurance market. In addition, the insurance industry consistently attracts well-capitalized new entrants to the market. Our future growth will depend in large part on our ability to grow our insurance business in which traditional insurance companies retain certain advantages. In particular, unlike us, many of these competitors offer customers the ability to purchase multiple other types of insurance coverage and “bundle” them together into one policy and, in certain circumstances, include an umbrella liability policy for additional coverage at competitive prices. Moreover, we may in the future expand into new lines of business and offer additional products beyond automobile insurance, and as we do so, we could face intense competition from traditional insurance companies that are already established in such markets. These new insurance products could take months to be approved by regulatory authorities or may not be approved at all. We have invested in growth strategies by utilizing unique customer value propositions, differentiated product offerings and distinctive advertising campaigns. If we are unsuccessful through these strategies in generating new business, retaining a sufficient number of customers or retaining or acquiring key relationships, our ability to maintain or increase premiums written or the ability to sell our products could be adversely impacted. Because of the competitive nature of the insurance industry, there can be no assurance that we will continue to compete effectively within our industry, or that competitive pressures will not have a material effect on our business, results of operations or financial condition.

We rely on telematics, mobile technology and our digital platform to collect data points that we evaluate in pricing and underwriting our insurance policies, managing claims and customer support, and improving business processes. To the extent regulators prohibit or restrict our collection or use of this data, our business could be harmed.

We use telematics, mobile technology and our digital platform to collect data points that we evaluate in pricing and underwriting certain of our insurance policies, managing claims and customer support, and improving business processes. If federal, state or international regulators were to determine that the type of data we collect, the process we use for collecting this data or how we use it unfairly discriminates against a protected class of people, regulators could move to prohibit or restrict our collection or use of this data. In addition, if legislation were to restrict our ability to collect driving behavior data, it could impair our capacity to underwrite insurance cost effectively, negatively impacting our revenue and earnings.

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Due to Proposition 103 in California, our largest market, we are currently limited in our ability to use telematics data beyond miles-driven to underwrite insurance, including data on how the car is driven. This could hinder our ability to accurately assess the risks that we underwrite in other states if they were to pass similar laws or regulations. In three other states where we currently operate, we do not use behavioral telematics data because it is either permitted, but we opted out given uncertainty regarding the impact such data would have on pricing or it is voluntary (meaning the policyholder has to opt in). As we aim to be a fully national provider of insurance across 49 states and the District of Columbia by 2022, we will need to comply with the rules and regulations of each market. At this time, we do not know which of our target markets prohibit, permit with conditions, or fully permit the use of behavioral telematics to set premiums, and if permitted, if this will be of benefit to us in pricing. While we are currently in discussions with regulators to allow the use of telematics to a greater extent to underwrite and price insurance policies, we cannot predict the outcome of these discussions, and there can be no assurance that state regulators will revise regulations accordingly, if at all, nor that current permissive states will further restrict the use of such data.

Although there is currently limited federal and state legislation outside of California restricting our ability to collect driving behavior data, private organizations are implementing principles and guidelines to protect driver privacy. The Alliance of Automobile Manufacturers and Global Automakers established their Consumer Privacy Protection Principles to provide member automobile manufacturers with a framework with which to consider privacy and build privacy into their products and services while the National Automobile Dealers Association has partnered with the Future of Privacy Forum to produce consumer education guidelines that explain the kinds of information that may be collected by consumers’ cars, the guidelines that govern how it is collected and used, and the options consumers may have to protect their vehicle data. The Global Alliance for Vehicle Data Access is another organization that was formed to advocate for driver ownership of all vehicle data, particularly for insurance underwriting purposes. If federal or state legislators were to pass laws limiting our ability to collect driver data, such legislation could have a material adverse effect on our business, financial condition or results of operations.

Some state regulators have expressed interest in the use of external data sources, algorithms and/or predictive models in insurance underwriting or rating. Specifically, regulators have raised questions about the potential for unfair discrimination, disparate impact, and lack of transparency associated with the use of external consumer data. A determination by federal or state regulators that the data points we collect and the process we use for collecting this data unfairly discriminates against a protected class of people could subject us to fines and other sanctions, including, but not limited to, disciplinary action, revocation and suspension of licenses, and withdrawal of product forms. Any such event could, in turn, materially and adversely affect our business, financial condition, results of operations and prospects. Although we have implemented policies and procedures into our business operations that we feel are appropriately calibrated to our machine learning and automation-driven operations, these policies and procedures may prove inadequate to manage our use of this nascent technology, resulting in a greater likelihood of inadvertent legal or compliance failures.

In addition, the National Association of Insurance Commissioners (“NAIC”), announced on July 23, 2020 the formation of a new Race and Insurance Special Committee (the “Special Committee”). The Special Committee is tasked with analyzing the level of diversity and inclusion within the insurance sector, identifying current practices in the insurance industry that disadvantage minorities and making recommendations to increase diversity and inclusion within the insurance sector and address practices that disadvantage minorities. The Special Committee may look into strengthening the unfair discrimination laws, such as prohibiting the use of credit scores in the underwriting of auto insurance. Any new unfair discrimination legislation that would prohibit us from using data that we currently use or plan to use in the future to underwrite insurance could negatively impact our business.

Regulators may also require us to disclose the external data we use, algorithms and/or predictive matters prior to approving our underwriting models and rates. Such disclosures could put our intellectual property at risk.

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Additionally, existing laws, such as the California Consumer Privacy Act (the “CCPA”), future and recently adopted laws, such as the California Privacy Rights Act (the “CRPA”), and evolving attitudes about privacy protection may impair our ability to collect, use, and maintain data points of sufficient type or quantity to develop and train our algorithms. If such laws or regulations were enacted federally or in a large number of states in which we operate, it could impact the integrity and quality of our pricing and underwriting processes.

We depend on search engines, social media platforms, digital app stores, content-based online advertising and other online sources to attract consumers to our website and our mobile app both rapidly and cost-effectively. If these third parties change their listings or increase their pricing, if our relationship with them deteriorates or terminates, or due to other factors beyond our control, we may be unable to attract new customers rapidly and cost-effectively, which would adversely affect our business and results of operations.

Our success depends on our ability to attract consumers to our website and our mobile app and convert them into customers in a rapid and cost-effective manner. We depend in large part on search engines, social media platforms, digital app stores, content-based online advertising and other online sources for traffic to our website and our mobile app, which are material sources for new consumers.

With respect to search engines, we are included in search results as a result of both paid search listings, where we purchase specific search terms that result in the inclusion of our advertisement, and free search listings, which depend on algorithms used by search engines. For paid search listings, if one or more of the search engines or other online sources on which we rely for purchased listings modifies or terminates its relationship with us, our expenses could rise if we are required to pay a higher price for such listings or if the alternatives we find are more expensive, or we could lose consumers and traffic to our website could decrease, any of which could have a material adverse effect on our business, results of operations and financial condition. For free search listings, if search engines on which we rely for algorithmic listings modify their algorithms, our websites may appear less prominently or not at all in search results, which could result in reduced traffic to our websites, as a result of which we might attract fewer new customers.

Our ability to maintain or increase the number of consumers who purchase our products after being directed to our website or our mobile app from other digital platforms depends on many factors that are not within our control. Search engines, social media platforms and other online sources often revise their algorithms and introduce new advertising products. If one or more of the search engines or other online sources on which we rely for traffic to our website and our mobile app were to modify its general methodology for how it displays our advertisements or keyword search results, resulting in fewer consumers clicking through to our website and our mobile app, our business and operating results are likely to suffer. In addition, if our online display advertisements are no longer effective or are not able to reach certain consumers due to consumers’ use of ad-blocking software, our business and operating results could suffer.

Additionally, changes in regulations could limit the ability of search engines and social media platforms, including but not limited to Google and Facebook, to collect data from users and engage in targeted advertising, making them less effective in disseminating our advertisements to our target customers. For example, the proposed Designing Accounting Safeguards to Help Broaden Oversight and Regulations on Data (“DASHBOARD”) Act would mandate annual disclosure to the SEC of the type and “aggregate value” of user data used by harvesting companies, such as Facebook, Google and Amazon, including how revenue is generated by user data and what measures are taken to protect the data. If the costs of advertising on search engines and social media platforms increase, we may incur additional marketing expenses or be required to allocate a larger portion of our marketing spend to other channels and our business and operating results could be adversely affected. Similarly, changes to regulations applicable to the insurance brokerage and distribution business may limit our ability to rely on key distribution platforms, if the third-party distribution platforms are unable to continue to distribute our insurance products without an insurance producer license pursuant to applicable insurance law and regulations.

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The marketing of our insurance products depends on our ability to cultivate and maintain cost-effective and otherwise satisfactory relationships with digital app stores, in particular, those operated by Google and Apple. As we grow, we may struggle to maintain cost-effective marketing strategies, and our customer acquisition costs could rise substantially. Furthermore, because many of our customers access our insurance products through a mobile app, we depend on the Apple App Store and the Google Play Store to distribute our mobile app.

Operating system platforms and application stores controlled by third parties, such as Apple and Google, may change their terms of service or policies in a manner that increases our costs or impacts our ability to distribute our mobile app, collect data through it, and market our products.

We are subject to the terms of service and policies governing the operating system platforms on which our mobile app runs and the application stores through which we distribute our mobile app, such as those operated by Apple and Google. These terms of service and policies govern the distribution, operation and promotion of applications on such platforms and stores. These platforms and stores have broad discretion to change and interpret their terms of service and policies in a manner that may adversely affect our business. For example, an operating system platform or application store may increase fees associated with access to it, restrict the collection of data through mobile apps that run on those platforms, restrict how that data is used and shared, and limit how mobile app publishers advertise online.

We rely on telematics to collect data points from an OBD-II device in customers’ vehicles. This data is used to accurately bill the miles they have driven, evaluate pricing and underwriting risks, manage claims and customer support, and improve business processes. Limitations on our ability to collect, use or share telematics and other data derived from the OBD-II device, as well as new technologies that block our ability to collect, use or share such data, could significantly diminish the value of our platform and have an adverse effect on our ability to generate revenue. Limitations or blockages on our ability to collect, use or share data derived from use of our mobile app may also restrict our ability to analyze such data to facilitate our product improvement, research and development and advertising activities. For example, in June 2020, Apple announced plans to require applications using its mobile operating systems to obtain an end-user’s permission to track them or access their device’s advertising identifier for advertising and advertising measurement purposes, as well as other restrictions that could adversely affect our business.

If we were to violate, or be perceived to have violated, the terms of service or policies of an operating system platform or application store, the provider may limit or block our access to it. It is possible that an operating system platform or application store might limit, eliminate or otherwise interfere with the distribution of our mobile app, the features we provide and the manner in which we market our mobile app, or give preferential treatment on their platforms or stores to a competitor. To the extent either or both of them do so, our business, results of operations and financial condition could be adversely affected.

Furthermore, one of the factors we use to evaluate our customer satisfaction and market position is our Apple App Store ratings. This rating, however, may not be a reliable indicator of our customer satisfaction relative to other companies who are rated on the Apple App Store since, to date, we have received a fraction of the number of reviews of some of the companies we benchmark against, and thus our number of positive reviews may not be as meaningful.

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Our expansion within the United States will subject us to additional costs and risks, and our plans may not be successful.

Our success depends in significant part on our ability to expand into additional markets in the United States and abroad. We are currently licensed in the District of Columbia and 49 states of the United States, with licenses active in 46 states and the District of Columbia, and write business in eight of those states. We plan to have a presence in almost all states by 2022 but cannot guarantee that we will be able to provide nationwide coverage on that timeline or at all. Moreover, one or more states could revoke our license to operate, or implement additional regulatory hurdles that could preclude or inhibit our ability to obtain or maintain our license in such states. As we seek to expand in the United States, we may incur significant operating expenses, although our expansion may not be successful for a variety of reasons, including because of:

● barriers to obtaining the required government approvals, licenses or other authorizations;

● failures in identifying and entering into joint ventures with strategic partners, both domestically and internationally, or entering into joint ventures that do not produce the desired results;

● challenges in, and the cost of, complying with various laws and regulatory standards, including with respect to the insurance business and insurance distribution, capital and outsourcing requirements, data privacy, tax, claims handling, and local regulatory restrictions;

● difficulty in recruiting and retaining licensed, talented and capable employees;

● competition from local incumbents that already own market share, better understand the local market, may market and operate more effectively and may enjoy greater local affinity or awareness;

● differing demand dynamics, which may make our product offerings less successful; or

● currency exchange restrictions or costs and exchange rate fluctuations, or significant increases to import tariffs.

Expansion into new markets in the United States will also require additional investments by us both in marketing and with respect to securing applicable regulatory approvals. These incremental costs may result from hiring additional personnel, from engaging third-party service providers and from incurring other research and development costs. If we invest substantial time and resources to expand our operations while our revenues from those additional operations do not exceed the expense of establishing and maintaining them, or if we are unable to manage these risks effectively, our business, results of operations and financial condition could be adversely affected.

If we fail to grow our geographic footprint or geographic growth occurs at a slower rate than expected, our business, results of operations and financial condition could be materially and adversely affected.

Our technology platform may not operate properly or as we expect it to operate.

We utilize our technology platform to gather customer data in order to determine whether or not to write and how to price our insurance products. Similarly, we use our technology platform to process many of our claims. Our technology platform is expensive and complex, its continuous development, maintenance and operation may entail unforeseen difficulties including material performance problems or undetected defects or errors. We may encounter technical obstacles, and it is possible that we may discover additional problems that prevent our technology from operating properly. If our platform does not function reliably, we may incorrectly select our customers, bill our customers, price insurance products or incorrectly pay or deny insurance claims made by our customers. These errors could result in inadequate insurance premiums paid relative to claims made, resulting in increased financial losses. These errors could also cause customer dissatisfaction with us, which could cause customers to cancel or fail to renew their insurance policies with us or make it less likely that prospective customers obtain new insurance policies from us. Additionally, technology platform errors may lead to unintentional bias and discrimination in the underwriting process, which could subject us to legal or regulatory liability and harm our brand and reputation. Any of these eventualities could result in a material adverse effect on our business, results of operations and financial condition.

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We depend on third-party technology providers to support our telematics data acquisition.

We utilize telematics technology to gather data that we use to underwrite insurance policies, bill customers, and manage claims and customer service. Our telematics hardware is designed and manufactured and telematics data services are provided to us by third parties. These companies may fail to provide us accurate or complete data due to technical or operating failures, their hardware may have errors that inaccurately collect or represent driver behavior, car location, or other sensor data, or they may go stop offering their services to us. If we are delivered inaccurate or no data due to these failures, we may overpay claims, underbill customers, or create customer dissatisfaction that causes customers to cancel their insurance policies with us. Any of these eventualities could result in a material adverse effect on our business, results of operations and financial condition.

Regulatory changes may limit our ability to develop or implement our telematics-based pricing model and/or may eliminate or restrict the confidentiality of our proprietary technology.

Our future success depends on our ability to continue to develop and implement our telematics-based pricing model, and to maintain the confidentiality of our proprietary technology. Changes to existing laws, their interpretation or implementation, or new laws could impede our use of this technology, or require that we disclose our proprietary technology to our competitors, which could negatively impact our competitive position and result in a material adverse effect on our business, results of operations, and financial condition. For example, the November 2020 ballot measure in California, which was formally adopted, will enact the CPRA, which mandates issuance of regulations providing California residents with the right to information about the logic of certain algorithmic decisions about them and the right to opt-out of such decisions. Such regulations, and similar laws that could be enacted in other states, could require disclosure of our proprietary technology, limit the effectiveness of our products and reduce demand for them.

Our brand may not become as widely known or accepted as incumbents’ brands or the brand may become tarnished.

Many of our competitors have brands that are well-recognized. As a relatively new entrant into the insurance market, we have spent, and expect that we will for the foreseeable future continue to spend, considerable amounts of money and other resources on creating brand awareness and building our reputation. We may not be able to build brand awareness to levels matching our competitors, and our efforts at building, maintaining and enhancing our reputation could fail and/or may not be cost-effective. Complaints or negative publicity about our business practices, our marketing and advertising campaigns (including marketing affiliations or partnerships), our compliance with applicable laws, the integrity of the data that we provide to consumers or business partners, data privacy and security issues, and other aspects of our business, whether real or perceived, could diminish confidence in our brand, which could adversely affect our reputation and business. As we expand our product offerings and enter new markets, we will need to establish our reputation with new customers, and to the extent we are not successful in creating positive impressions, our business in these newer markets could be adversely affected. While we may choose to engage in a broader marketing campaign to further promote our brand, this effort may not be successful or cost effective. If we are unable to maintain or enhance our reputation or enhance consumer awareness of our brand in a cost-effective manner, our business, results of operations and financial condition could be materially adversely affected.

We may not continue to grow at historical rates or achieve or maintain profitability in the future.

Our limited operating history may make it difficult to evaluate our current business and our future prospects. While our revenue has grown in recent periods, this growth rate may not be sustainable and should not be considered indicative of future performance, and we may not realize sufficient revenue to achieve or maintain profitability. As we grow our business, we expect our revenue growth rates may slow in future periods due to a number of reasons, which may include slowing demand for our service, increasing competition, a decrease in the growth of our overall market, and our failure to capitalize on growth opportunities or the maturation of our business. We have incurred net losses on an annual basis since our inception, and may incur significant losses in the future for a number of reasons, including insufficient growth in the number of customers, a failure to retain our existing customers, and increasing competition, as well as other risks described in these Risk Factors, and we may encounter unforeseen expenses, difficulties, complications and delays and other unknown factors. We expect to continue to make investments in the development and expansion of our business, which may not result in increased or sufficient revenue or growth, as a result of which we may not be able to achieve or maintain profitability.

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We rely on highly skilled and experienced personnel and if we are unable to attract, retain or motivate key personnel or hire qualified personnel, our business may be seriously harmed. In addition, the loss of key senior management personnel could harm our business and future prospects.

Our performance largely depends on the talents and efforts of highly-skilled and experienced individuals. Our future success depends on our continuing ability to identify, hire, develop, motivate and retain highly skilled and experienced personnel and, if we are unable to hire and train a sufficient number of qualified employees for any reason, we may not be able to maintain or implement our current initiatives or grow, or our business may contract and we may lose market share. Moreover, certain of our competitors or other insurance or technology businesses may seek to hire our employees. We cannot assure you that our equity incentives and other compensation will provide adequate incentives to attract, retain and motivate employees in the future, particularly if the market price of our Common Stock does not increase or declines. If we do not succeed in attracting, retaining and motivating highly qualified personnel, our business may be seriously harmed.

We depend on our senior management, including Dan Preston, our Chief Executive Officer, and Paw Andersen, our Chief Technology Officer, as well as other key personnel. We may not be able to retain the services of any of our senior management or other key personnel, as their employment is at-will and they could leave at any time. If we lose the services of one or more of our senior management and other key personnel, including as a result of the COVID-19 pandemic, we may not be able to successfully manage our business, meet competitive challenges or achieve our growth objectives. Further, to the extent that our business grows, we will need to attract and retain additional qualified management personnel in a timely manner, and we may not be able to do so. Our future success depends on our continuing ability to identify, hire, develop, motivate, retain and integrate highly skilled personnel in all areas of our organization.

New legislation or legal requirements may affect how we communicate with our customers, which could have a material adverse effect on our business model, financial condition, and results of operations.

State and federal lawmakers, insurance regulators, and advisory groups such as the NAIC are focusing upon the use of artificial intelligence broadly, including concerns about transparency, deception, and fairness in particular. Changes in laws or regulations, or changes in the interpretation of laws or regulations by a regulatory authority, specific to the use of artificial intelligence, may decrease our revenues and earnings and may require us to change the manner in which we conduct some aspects of our business. We may also be required to disclose our proprietary software to regulators, putting our intellectual property at risk, in order to receive regulatory approval to use such artificial intelligence in the underwriting of insurance and/or the payment of claims. In addition, our business and operations are subject to various U.S. federal, state, and local consumer protection laws, including laws which place restrictions on the use of automated tools and technologies to communicate with wireless telephone subscribers or consumers generally. For example, a California law, effective as of July 2019, makes it unlawful for any person to use a bot to communicate with a person in California online with the intent to mislead the other person about its artificial identity for the purpose of knowingly deceiving the person about the content of the communication in order to incentivize a purchase of goods or services in a commercial transaction. Although we have taken steps to mitigate our liability for violations of this and other laws restricting the use of electronic communication tools, no assurance can be given that we will not be exposed to civil litigation or regulatory enforcement. Further, to the extent that any changes in law or regulation further restrict the ways in which we communicate with prospective or current customers before or during onboarding, customer care, or claims management, these restrictions could result in a material reduction in our customer acquisition and retention, reducing the growth prospects of our business, and adversely affecting our financial condition and future cash flows.

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Severe weather events and other catastrophes, including the effects of climate change, are inherently unpredictable and may have a material adverse effect on our financial results and financial condition.

Our business may be exposed to catastrophic events such as tornadoes, tsunamis, tropical storms (including hurricanes), earthquakes, windstorms, hailstorms, severe thunderstorms, wildfires and other fires, as well as non-natural events such as explosions, riots, terrorism, or war, which could cause operating results to vary significantly from one period to the next. We may incur catastrophe losses in our business in excess of: (1) those experienced in prior years, (2) the average expected level used in pricing, (3) current reinsurance coverage limits, or (4) loss estimates from external tornado, hail, hurricane and earthquake models at various levels of probability. In addition, we are subject to customer insurance claims arising from weather events such as winter storms, rain, hail and high winds. The incidence and severity of weather conditions are largely unpredictable. There is generally an increase in the frequency and severity of customer insurance claims when severe weather conditions occur.

The incidence and severity of severe weather conditions and catastrophes are inherently unpredictable and the occurrence of one catastrophe does not render the possibility of another catastrophe greater or lower. The extent of losses from a catastrophe is a function of both the total amount of insured exposure in the area affected by the event and the severity of the event. In particular, severe weather and other catastrophes could significantly increase our costs due to a surge in claims following such events and/or legal and regulatory changes in response to catastrophes that may impair our ability to limit our liability under our policies. Severe weather conditions and catastrophes can cause greater losses for us, which can cause our liquidity and financial condition to deteriorate. Given our current state mix and performance of our book, we do not currently carry event reinsurance coverage for severe weather events. In addition, reinsurance placed in the market also carries some counterparty credit risk.

Climate change may affect the occurrence of certain natural events, such as an increase in the frequency or severity of wind and thunderstorm events, eruptions of volcanoes, and tornado or hailstorm events due to increased convection in the atmosphere; more frequent wildfires and subsequent landslides in certain geographies; higher incidence of deluge flooding and the potential for an increase in severity of the hurricane events due to higher sea surface temperatures. Additionally, climate change may cause an impact on the demand, price and availability of insurance, as well as the value of our investment portfolio. Due to significant variability associated with future changing climate conditions, we are unable to predict the impact climate change will have on our business.

Denial of claims or our failure to accurately and timely pay claims could materially and adversely affect our business, financial condition, results of operations, brand and prospects.

Under the terms of our policies, we are required to accurately and timely evaluate and pay claims. Our ability to do so depends on a number of factors, including the efficacy of our claims processing, the training and experience of our claims adjusters, including our third-party claims administrators, and our ability to develop or select and implement appropriate procedures and systems to support our claims functions.

We believe that the speed at which our technology-based claims processing platform allows us to process and pay claims is a differentiating factor for our business relative to our competitors, and an increase in the average time to process claims could lead to customer dissatisfaction and undermine our reputation and position in the insurance marketplace. If our claims adjusters or third-party claims administrators are unable to effectively process our volume of claims, our ability to grow our business while maintaining high levels of customer satisfaction could be compromised, which in turn, could adversely affect our operating margins. Any failure to pay claims accurately or timely could also lead to regulatory and administrative actions or other legal proceedings and litigation against us, or result in damage to our reputation, any one of which could materially and adversely affect our business, financial condition, results of operations, brand and prospects.

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Unexpected increases in the frequency or severity of claims may adversely affect our results of operations and financial condition.

Our business may experience volatility in claim frequency from time to time, and short-term trends may not continue over the longer term. Changes in claim frequency may result from changes in mix of business, miles driven, distracted driving, macroeconomic or other factors. A significant increase in claim frequency could have an adverse effect on our results of operations and financial condition.

Changes in bodily injury claim severity are impacted by inflation in medical costs, litigation trends and precedents, regulation and the overall safety of automobile travel. Changes in auto property damage claim severity are driven primarily by inflation in the cost to repair vehicles, including parts and labor rates, the mix of vehicles that are declared total losses, model year mix as well as used car values. While actuarial models for pricing and reserving typically include an expected level of inflation, unanticipated increases in claim severity can arise from events that are inherently difficult to predict. Although we pursue various loss management initiatives to mitigate future increases in claim severity, there can be no assurances that these initiatives will successfully identify or reduce the effect of future increases in claim severity.

Failure to maintain our risk-based capital at the required levels could adversely affect our ability to maintain regulatory authority to conduct our business.

We are required to have sufficient capital and surplus in order to comply with insurance regulatory requirements, support our business operations and minimize our risk of insolvency. The NAIC has developed a system to test the adequacy of statutory capital and surplus of U.S.-based insurers, known as risk-based capital, that all states have adopted. This system establishes the minimum amount of capital and surplus necessary for an insurance company to support its overall business operations in consideration of its size and risk profile. It identifies insurers that may be inadequately capitalized by looking at certain risk factors, including asset risk, credit risk and underwriting risk with respect to the insurer’s business in order to determine an insurer’s authorized control level risk-based capital. An insurer’s risk-based capital ratio measures the relationship between its total adjusted capital and its authorized control level risk-based capital.

Insurers with a ratio falling below certain calculated thresholds may be subject to varying degrees of regulatory action, including heightened supervision, examination, rehabilitation or liquidation. An insurance company with total adjusted capital that is less than 200% of its authorized control level risk-based capital is at a company action level, which would require the insurance company to file a risk-based capital plan that, among other things, contains proposals of corrective actions the company intends to take that are reasonably expected to result in the elimination of the company action level event. Additional action level events occur when the insurer’s total adjusted capital falls below 150%, 100% and 70% of its authorized control level risk-based capital. Lower percentages trigger increasingly severe regulatory responses. In the event of a mandatory control level event (triggered when an insurer’s total adjusted capital falls below 70% of its authorized control level risk-based capital), an insurer’s primary regulator is required to take steps to place the insurer into receivership. As part of its regulatory review and approval of this transaction, the Delaware Department of Insurance required us to enter into a Capital Maintenance Agreement (the “CMA”). The CMA requires us, if the transaction closes, to ensure that the regulated insurance subsidiary, Metromile Insurance Company, will have and maintain total adjusted capital in an amount equal to at least 300% of the insurance company’s authorized control level risk based capital from the close of the transaction until a date to be determined by the regulator in mid-2025. Being required to maintain capital levels above the statutory requirement could put constraints on our ability to deploy capital to which our competitors are not subject.

In addition, the NAIC Insurance Regulatory Information System (the “IRIS”), is a collection of analytical tools designed to provide state insurance regulators with an integrated approach to screening and analyzing the financial condition of insurance companies operating in their respective states. If our ratios fall outside of the usual range for one or more ratios set forth by the IRIS for any number of reasons, it could subject us to heightened regulatory scrutiny or measures, or create investor uncertainty around the stability of our financial condition, which could harm our business.

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Further, the NAIC has promulgated a Model Regulation to Define Standards and Commissioner’s Authority for Companies Deemed to be in Hazardous Financial Condition (the “Hazardous Financial Condition Standards”), which has been adopted by many states in whole or part. If our financial condition is deemed by state insurance regulators to meet the Hazardous Financial Conditions Standards, it could subject us to heightened regulatory scrutiny or measures, or create uncertainty around the stability of our financial condition, which could harm our business.

As a relatively new entrant to the insurance industry, we may face additional capital and surplus requirements as compared to those of our larger and more established competitors. Failure to maintain adequate risk-based capital at the levels required by law and/or the Delaware Department of Insurance as described above could result in increasingly onerous reporting and examination requirements and could adversely affect our ability to maintain regulatory authority to conduct our business.

Security incidents, or real or perceived errors, failures or bugs in our systems, website or app could impair our operations, compromise our confidential information or our customers’ personal information, damage our reputation and brand, and harm our business and operating results.

Our continued success depends on our systems, applications, and software continuing to operate and to meet the changing needs of our customers and users. We rely on our technology and engineering staff and vendors to successfully implement changes to and maintain our systems and services in an efficient and secure manner. Like all information systems and technology, our website and mobile app may contain or develop material errors, failures, vulnerabilities or bugs, particularly when new features or capabilities are released, and may be subject to computer viruses or malicious code, break-ins, phishing impersonation attacks, attempts to overload our servers with denial-of-service or other attacks, ransomware and similar incidents or disruptions from unauthorized use of our computer systems, as well as unintentional incidents causing data leakage, any of which could lead to interruptions, delays or website or mobile app shutdowns.

Operating our business and products involves the collection, storage, use and transmission of sensitive, proprietary and confidential information, including personal information, pertaining to our current, prospective and past customers, staff, contractors, and business partners. The security measures we take to protect this information may be breached as a result of computer malware, viruses, social engineering, ransomware attacks, hacking and cyberattacks, including by state-sponsored and other sophisticated organizations. Such incidents have become more prevalent in recent years. For example, attempts to fraudulently induce our personnel into disclosing usernames, passwords or other information that can be used to access our systems and the information in them have increased and could be successful. Our security measures could also be compromised by our personnel, theft or errors, or be insufficient to prevent exploitation of security vulnerabilities in software or systems on which we rely. Such incidents have in the past resulted in unauthorized access to certain personal information, and may in the future result in unauthorized, unlawful or inappropriate use, destruction or disclosure of, access to, or inability to access the sensitive, proprietary and confidential information that we handle. These incidents may remain undetected for extended periods of time.

We rely on third-party service providers to provide critical services that help us deliver our solutions and operate our business. These providers may support or operate critical business systems for us or store or process the same sensitive, proprietary and confidential information that we handle. These service providers may not have adequate security measures and could experience a security incident that compromises the confidentiality, integrity or availability of the systems they operate for us or the information they process on our behalf. Such occurrences could adversely affect our business to the same degree as if we had experienced these occurrences directly and we may not have recourse to the responsible third-party service providers for the resulting liability we incur.

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Because there are many different cybercrime and hacking techniques and such techniques continue to evolve, we may be unable to anticipate attempted security breaches, react in a timely manner or implement adequate preventative measures. While we have developed systems and processes designed to protect the integrity, confidentiality and security of our and our customers’ confidential and personal information under our control, we cannot assure you that any security measures that we or our third-party service providers have implemented will be effective against current or future security threats.

A security breach or other security incident of our systems, data, website or app has occurred in the past, and may occur in the future. For example, in January 2021, we discovered a security incident related to our online pre-filled quote form and application process, which resulted in unknown person(s) accessing personal information of certain individuals, including individuals’ driver’s license numbers. An actual security breach or incident, a material vulnerability, or the perception that one has occurred or exists, could result in a loss of customer confidence in the security of our platform and damage to our reputation and brand; reduce demand for our insurance products; disrupt normal business operations; require us to expend significant capital and resources to investigate and remedy the incident, and prevent recurrence and comply with any breach notification obligations; and subject us to litigation (including class actions), regulatory enforcement action, fines, penalties, and other liability, which could adversely affect our business, financial condition and results of operations.

Even if we take steps that we believe are adequate to protect us from cyber threats, hacking against our competitors or other companies in our industry could create the perception among our customers or potential customers that our digital platform is not safe to use. Security incidents could also damage our IT systems and our ability to make the financial reports and other public disclosures required of public companies. These risks are likely to increase as we continue to grow and process, store and transmit an increasingly large volume of data.

We may be unable to prevent, monitor or detect fraudulent activity, including policy acquisitions or payments of claims that are fraudulent in nature.

If we fail to maintain adequate systems and processes to prevent, monitor and detect fraud, including fraudulent policy acquisitions or claims activity, or if inadvertent errors occur with such prevention, monitoring and detection systems due to human or computer error, our business could be materially adversely impacted. While we believe past incidents of fraudulent activity have been relatively isolated, we cannot be certain that our systems and processes will always be adequate in the face of increasingly sophisticated and ever-changing fraud schemes. We use a variety of tools to protect against fraud, but these tools may not always be successful at preventing such fraud.

Instances of fraud may result in increased costs, including possible settlement and litigation expenses, and could have a material adverse effect on our business and reputation. In addition, failure to monitor and detect fraud and otherwise comply with state Special Investigation Unit requirements can result in regulatory fines or penalties.

We are subject to stringent and changing privacy and data security laws, regulations, and standards related to data privacy and security. Our actual or perceived failure to comply with such obligations could harm our reputation, subject us to significant fines and liability, or adversely affect our business.

In the United States, insurance companies are subject to the privacy provisions of the federal Gramm-Leach-Bliley Act and the NAIC Insurance Information and Privacy Protection Model Act, to the extent adopted and implemented by various state legislatures and insurance regulators. The regulations implementing these laws require insurance companies to disclose their privacy practices to consumers, allow them to opt-in or opt-out, depending on the state, of the sharing of certain personal information with unaffiliated third parties, and maintain certain security controls to protect their information. Violators of these laws face regulatory enforcement action, substantial civil penalties, injunctions, and in some states, private lawsuits for damages.

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Privacy and data security regulation in the U.S. is rapidly evolving. For example, California recently enacted the CCPA, which became effective January 1, 2020. The CCPA and related regulations give California residents expanded rights to access and request deletion of their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used and shared. The CCPA provides for civil penalties for violations, as well as a private right of action for certain data breaches, which is expected to increase the volume and success of class action data breach litigation. In addition to increasing our compliance costs and potential liability, the CCPA’s restrictions on “sales” of personal information may restrict our use of cookies and similar technologies for advertising purposes. The CCPA excludes information covered by Gramm-Leach-Bliley Act, the Driver’s Privacy Protection Act, the Fair Credit Reporting Act (the “California Financial Information Privacy Act”) from the CCPA’s scope, but the CCPA’s definition of “personal information” is broad and may encompass other information that we maintain. Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent privacy legislation in the U.S., and multiple states have enacted or proposed similar laws. There is also discussion in Congress of new comprehensive federal data protection and privacy law to which we likely would be subject if it is enacted.

In addition, California voters approved the November 2020 ballot measure which will enact the CPRA, substantially expanding the requirements of the CCPA. As of January 1, 2023, the CPRA will give consumers the ability to limit use of precise geolocation information and other categories of information classified as “sensitive”; add e-mail addresses and passwords to the list of personal information that, if lost or breached, would give the affected consumers the right to bring private lawsuits; increase the maximum penalties threefold for violations concerning consumers under age 16; and establish the California Privacy Protection Agency to implement and enforce the new law, as well as impose administrative fines. The effects of the CCPA, CPRA and other similar state or federal laws are potentially significant and may require us to modify our data processing practices and policies, incur substantial compliance costs and subject us to increased potential liability.

In addition to privacy and data security requirements under applicable laws, we are subject to the Payment Card Industry Data Security Standard (“PCI DSS”), a self-regulatory standard that requires companies that process payment card data to implement certain data security measures. If we or our payment processors fail to comply with the PCI DSS, we may incur significant fines or liability and lose access to major payment card systems. Industry groups may in the future adopt additional self-regulatory standards by which we are legally or contractually bound.

If we expand into Europe, we may also face particular privacy, data security, and data protection risks in connection with requirements of the General Data Protection Regulation (E.U.) 2016/679 (“GDPR”) and other data protection regulations. Among other stringent requirements, the GDPR restricts transfers of data outside of the E.U. to countries deemed to lack adequate privacy protections (such as the U.S.), unless an appropriate safeguard specified by the GDPR is implemented. A July 16, 2020 decision of the Court of Justice of the European Union invalidated a key mechanism for lawful data transfer to the U.S. and called into question the viability of its primary alternative. As such, the ability of companies to lawfully transfer personal data from the E.U. to the U.S. is presently uncertain. Other countries have enacted or are considering enacting similar cross-border data transfer rules or data localization requirements. These developments could limit our ability to deliver our products in the E.U. and other foreign markets. In addition, any failure or perceived failure to comply with these rules may result in regulatory fines or penalties including orders that require us to change the way we process data.

Additionally, we are subject to the terms of our privacy policies, privacy-related disclosures, and contractual and other privacy-related obligations to our customers and other third parties. Any failure or perceived failure by us or third parties we work with to comply with these policies, disclosures, and obligations to customers or other third parties, or privacy or data security laws may result in governmental or regulatory investigations, enforcement actions, regulatory fines, criminal compliance orders, litigation or public statements against us by consumer advocacy groups or others, and could cause customers to lose trust in us, all of which could be costly and have an adverse effect on our business.

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We rely on our mobile application to execute our business strategy. Government regulation of the internet and the use of mobile applications in particular is evolving, and unfavorable changes could seriously harm our business.

We rely on our mobile application to execute our business strategy. We are subject to general business regulations and laws as well as federal and state regulations and laws specifically governing the internet and the use of mobile applications in particular. Existing and future laws and regulations may impede the growth of the internet or other online services, and increase the cost of providing online services. These regulations and laws may involve taxes, tariffs, privacy and data security, anti-spam, content protection, electronic contracts and communications, electronic signatures and consents, consumer protection and social media marketing. It is at times not clear how existing laws governing issues such as property ownership, sales and other taxes and consumer privacy apply to the internet and the use of mobile applications in particular, as the vast majority of these laws were adopted prior to the advent of the internet and the use of mobile applications and do not contemplate or address the unique issues raised by the internet. It is possible that general business regulations and laws, or those specifically governing the internet and the use of mobile applications in particular, may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. We cannot be sure that our practices have complied, currently comply or will comply fully with all such laws and regulations. Any failure, or perceived failure, by us to comply with any of these laws or regulations could result in damage to our reputation, a loss in business and proceedings or actions against us by governmental entities or others. Any such proceeding or action could hurt our reputation, force us to spend significant amounts in defense of these proceedings, distract our management, increase our costs of doing business and decrease the use of our mobile application or website by consumers and suppliers and may result in the imposition of monetary liability. We may also be contractually liable to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any such laws or regulations.

Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services and brand.

Our trade secrets, trademarks, copyrights, patents, and other intellectual property rights are important assets for us. We rely on, and expect to continue to rely on, various agreements with our employees, independent contractors, consultants and third parties with whom we have relationships, as well as trademark, trade dress, domain name, copyright, patent, and trade secret laws, to protect our brand and other intellectual property rights. Such agreements may not effectively prevent unauthorized use or disclosure of our confidential information, intellectual property or technology and may not provide an adequate remedy in the event of unauthorized use or disclosure of our confidential information, intellectual property or technology, and we may fail to consistently obtain, police and enforce such agreements. Additionally, various factors outside our control pose a threat to our intellectual property rights, as well as to our products, services and technologies. For example, we may fail to obtain effective intellectual property protection, or effective intellectual property protection may not be available in every country in which our products and services are available. Also, the efforts we have taken to protect our intellectual property rights may not be sufficient or effective in all cases. For example, governmental entities that grant intellectual property rights may deny our applications for such rights despite our best efforts. Additionally, granted intellectual property rights are subject to challenge. Successful challenges may result in such rights being narrowed in scope or declared invalid or unenforceable. Despite our efforts to obtain and protect broad intellectual property rights, there can be no assurance our intellectual property rights will be sufficient to protect against others offering products or services that are substantially similar to ours and compete with our business, and unauthorized parties may attempt to copy aspects of our technology and use information that we consider proprietary. Competitors or other third parties may also attempt to circumvent or design around our intellectual property rights.

In addition to registered intellectual property rights such as trademark registrations, we rely on non-registered proprietary information and technology, such as trade secrets, confidential information, know-how and technical information. Certain information or technology that we endeavor to protect as trade secrets may not be eligible for trade secret protection in all jurisdictions, or the measures we undertake to establish and maintain such trade secret protection may be inadequate. In order to protect our proprietary information and technology, we rely in part on agreements with our employees, investors, independent contractors and other third parties that place restrictions on the use and disclosure of this intellectual property. In some cases, these agreements may not adequately protect our trade secrets, these agreements may be breached, or this intellectual property, including trade secrets, may otherwise be disclosed or become known to our competitors, which could cause us to lose a competitive advantage resulting from this intellectual property. However, our employees, independent contractors or other third parties with whom we do business may nonetheless use intellectual property owned by others in their work for us, and disputes may arise as to the rights in related or resulting know-how and inventions. Current or future legal requirements may require us to disclose certain proprietary information or technology, such as our proprietary algorithms, to regulators or other third parties, including our competitors, which could impair or result in the loss of trade secret protection for such information or technology. The loss of trade secret protection could make it easier for third parties to compete with our products and services by copying functionality. In addition, any changes in, or unexpected interpretations of, intellectual property laws may compromise our ability to enforce our trade secret and intellectual property rights. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain protection of our trade secrets or other proprietary information could harm our business, results of operations and competitive position.

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We have filed, and may continue in the future to file, applications to protect certain of our innovations and intellectual property. We do not know whether any of our applications will result in the issuance of a patent, trademark or copyright, as applicable, or whether the examination process will require us to narrow our claims or otherwise limit the scope of such intellectual property. In addition, we may not receive competitive advantages from the rights granted under our intellectual property. Our existing intellectual property, and any intellectual property granted to us or that we otherwise acquire in the future, may be contested, circumvented or invalidated, and we may not be able to prevent third parties from infringing our intellectual property rights. Therefore, the exact effect of the protection of this intellectual property cannot be predicted with certainty. Because obtaining patent protection requires disclosing our inventions to the public, such disclosure may facilitate our competitors developing improvements to our innovations. Given this risk, we may sometimes choose not to seek patent protection for certain innovations and instead rely on trade secret protection. Any failure to adequately obtain such patent protection, or other intellectual property protection, could later prove to adversely impact our business.

We currently hold various domain names relating to our brand, including Metromile.com. Failure to protect our domain names could adversely affect our reputation and brand and make it more difficult for users to find our website and our mobile app. We may be unable, without significant cost or at all, to prevent third parties from acquiring domain names that are similar to, infringe upon or otherwise decrease the value of our trademarks and other proprietary rights.

We may be required to spend significant resources in order to monitor and protect our intellectual property rights, and some violations may be difficult or impossible to detect. For example, infringement of patent rights related to internal software processes may be difficult to detect. Litigation to protect and enforce our intellectual property rights could be costly, time-consuming and distracting to management and could result in the impairment or loss of portions of our intellectual property. Our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights or asserting that we infringe third-party intellectual property rights. The unauthorized copying or use of our proprietary technology, as well as any costly litigation or diversion of our management’s attention and resources, could impair the functionality of our platform, delay introductions of enhancements to our platform, result in our substituting inferior or more costly technologies into our platform or harm our reputation or brand. In addition, we may be required to license additional technology from third parties to develop and market new offerings or platform features, which may not be on commercially reasonable terms or at all and could adversely affect our ability to compete.

Although we take measures to protect our intellectual property, if we are unable to prevent the unauthorized use or exploitation of our intellectual property, the value of our brand, content, and other intangible assets may be diminished, competitors may be able to more effectively mimic our service and methods of operations, the perception of our business and service to customers and potential customers may become confused, and our ability to attract customers may be adversely affected. Any failure to protect our intellectual property could adversely impact our business, results of operations and financial condition. While we take precautions designed to protect our intellectual property, it may still be possible for competitors and other unauthorized third parties to copy our technology and use our proprietary brand, content and information to create or enhance competing solutions and services, which could adversely affect our competitive position in our rapidly evolving and highly competitive industry. Some license provisions that protect against unauthorized use, copying, transfer and disclosure of our technology may be unenforceable under the laws of certain jurisdictions and foreign countries. While we enter into confidentiality and invention assignment agreements with our employees and consultants and enter into confidentiality agreements with our third-party providers and strategic partners, we cannot assure you that these agreements will be effective in controlling access to, and use and distribution of, our products and proprietary information. Further, these agreements do not prevent our competitors from independently developing technologies that are substantially equivalent or superior to our offerings.

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Some of our products and services contain open source software, which may pose particular risks to our proprietary software, products, and services in a manner that could have a negative effect on our business.

We use open source software in our products and services and anticipate continuing to use open source software in the future. Some open source software licenses require those who distribute open source software as part of their own software product to publicly disclose all or part of the source code of such software product or to make available any derivative works of the open source code on unfavorable terms or at no cost, and we may be subject to such terms. The terms of certain open source licenses to which we are subject have not been interpreted by U.S. or foreign courts, and there is a risk that open source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to provide or distribute our products or services. Additionally, we could face claims from third parties claiming ownership of, or demanding release of, the open source software or derivative works that we develop using such software, which could include our proprietary source code, or otherwise seeking to enforce the terms of the applicable open source license. These claims could result in litigation and could require us to make our software source code freely available, purchase a costly license or cease offering the implicated products or services unless and until we can re-engineer such source code to eliminate use of such open source software. This re-engineering process could require us to expend significant additional research and development resources, and we may not be able to complete the re-engineering process successfully. In addition to risks related to license requirements, use of certain open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties, assurance of title or controls on the origin or operation of the open source software, which are risks that cannot be eliminated, and could, if not properly addressed, negatively affect our business. We have established processes to help alleviate these risks, including a review process for screening requests from our development teams for the use of open source software, but we cannot be sure that all of our use of open source software is in a manner that is consistent with our current policies and procedures, or will not subject us to liability. Any of these risks could be difficult to eliminate or manage, and, if not addressed, could have a negative effect on our business, financial condition and operating results.

Claims by others that we infringe or have infringed their proprietary technology or other intellectual property rights could harm our business.

Companies in the internet and technology industries are frequently subject to litigation based on allegations of infringement or other violations of intellectual property rights. In addition, certain companies and rights holders seek to enforce and monetize patents or other intellectual property rights they own, have purchased or have otherwise obtained. As we gain an increasingly high public profile, the possibility of intellectual property rights claims against us grows. From time to time, third parties may assert claims of infringement of intellectual property rights against us. Although we may have meritorious defenses, there can be no assurance that we will be successful in defending against these allegations or in reaching a business resolution that is satisfactory to us. Our competitors and others may now and in the future have significantly larger and more mature patent portfolios than us. In addition, future litigation may involve patent holding companies or other adverse patent owners who have no relevant product or service revenue and against whom our own patents may therefore provide little or no deterrence or protection. Many potential litigants, including some of our competitors and patent-holding companies, have the ability to dedicate substantial resources to the assertion of their intellectual property rights. Any claim of infringement by a third party, even those without merit, could cause us to incur substantial costs defending against the claim, could distract our management from our business and could require us to cease use of such intellectual property. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, we risk compromising our confidential information during this type of litigation. We may be required to pay substantial damages, royalties or other fees in connection with a claimant securing a judgment against us, we may be subject to an injunction or other restrictions that prevent us from using or distributing our intellectual property, or from operating under our brand, or we may agree to a settlement that prevents us from distributing our offerings or a portion thereof, which could adversely affect our business, results of operations and financial condition.

With respect to any intellectual property rights claim, we may have to seek out a license to continue operations found or alleged to violate such rights, which may not be available, or if available, may not be available on favorable or commercially reasonable terms and may significantly increase our operating expenses. Some licenses may be non-exclusive, and therefore our competitors may have access to the same technology licensed to us. If a third party does not offer us a license to its intellectual property on reasonable terms, or at all, we may be required to develop alternative, non-infringing technology, which could require significant time (during which we would be unable to continue to offer our affected offerings), effort and expense and may ultimately not be successful. Any of these events could adversely affect our business, results of operations and financial condition.

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We may be subject to compliance obligations arising from medical information privacy regulations.

By processing certain personal injury data on behalf of our clients, we may be subject to compliance obligations under privacy and data security-related laws specific to the protection of healthcare or medical information. Although we may be subject to the Health Insurance Portability and Accountability Act (“HIPAA”), the Health Information Technology for Economic and Clinical Health Act (the “HITECH Act”) and comparable state laws, we do not have a process in place to assess or align our privacy and security practices specifically against requirements for protecting medical information.

We may be unable to prevent or address the misappropriation of our data.

From time to time, third parties may misappropriate our data through website scraping, bots or other means and aggregate this data on their websites with data from other companies. In addition, copycat websites or mobile apps may misappropriate data and attempt to imitate our brand or the functionality of our website or our mobile app. If we become aware of such websites or mobile apps, we intend to employ technological or legal measures in an attempt to halt their operations. However, we may be unable to detect all such websites or mobile apps in a timely manner and, even if we could, technological and legal measures may be insufficient to halt their operations. In some cases, particularly in the case of websites or mobile apps operating outside of the U.S., our available remedies may not be adequate to protect us against the effect of the operation of such websites or mobile apps. Regardless of whether we can successfully enforce our rights against the operators of these websites or mobile apps, any measures that we may take could require us to expend significant financial or other resources, which could harm our business, results of operations or financial condition. In addition, to the extent that such activity creates confusion among consumers or advertisers, our brand and business could be harmed.

If our customers were to claim that the policies they purchased failed to provide adequate or appropriate coverage, we could face claims that could harm our business, results of operations and financial condition.

Although we aim to provide adequate and appropriate coverage under each of our policies, customers could purchase policies that prove to be inadequate or inappropriate. If such customers were to bring a claim or claims alleging that we failed in our responsibilities to provide them with the type or amount of coverage that they sought to purchase, we could be found liable for amounts significantly in excess of the policy limit, resulting in an adverse effect on our business, results of operations and financial condition. While we maintain errors and omissions insurance coverage to protect us against such liability, such coverage may be insufficient or inadequate.

If we are unable to underwrite risks accurately or charge competitive yet profitable rates to our customers, our business, results of operations and financial condition will be adversely affected.

In general, the premiums for our insurance policies are established at the time a policy is issued and, therefore, before all of our underlying costs are known. The accuracy of our pricing depends on our ability to adequately assess risks, estimate losses and comply with state insurance regulations. Like other insurance companies, we rely on estimates and assumptions in setting our premium rates. We also utilize the data that we gather through our interactions with our customers, as evaluated and curated by our technology-based pricing platform.

Establishing adequate premium rates is necessary, together with investment income, if any, to generate sufficient revenue to offset losses, LAE, and other costs. If we do not accurately assess the risks that we underwrite, the premiums that we charge may not be adequate to cover our losses and expenses, which would adversely affect our results of operations and our profitability. Moreover, if we determine that our prices are too low, insurance regulations may preclude us from being able to cancel insurance contracts, non-renew customers, or raise premiums. Alternatively, we could set our premiums too high, which could reduce our competitiveness and lead to fewer customers and lower revenues, which could have a material adverse effect on our business, results of operations and financial condition.

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Pricing involves the acquisition and analysis of historical loss data and the projection of future trends, loss costs and expenses, and inflation trends, among other factors, for each of our products in multiple risk tiers and many different markets. In order to accurately price our policies, we must:

● collect and properly analyze a substantial volume of data from our customers;

● develop, test and apply appropriate actuarial projections and rating formulas;

● review and evaluate competitive product offerings and pricing dynamics;

● closely monitor and timely recognize changes in trends; and

● project both frequency and severity of our customers’ losses with reasonable accuracy; and

● in many states obtain regulatory approval for these processes and the resulting rates.

There are no assurances that we will have success in implementing our pricing methodology accurately in accordance with our assumptions. Our ability to accurately price our policies is subject to a number of risks and uncertainties, including:

● insufficient or unreliable data;

● incorrect or incomplete analysis of available data;

● uncertainties generally inherent in estimates and assumptions;

● our failure to implement appropriate actuarial projections and rating formulas or other pricing methodologies;

● incorrect or incomplete analysis of the competitive environment;

● regulatory constraints on rate increases or the use of certain types of data; and

● our failure to accurately estimate investment yields and the duration of our liability for loss and loss adjustment expenses, as well as unanticipated court decisions, legislation or regulatory action.

To address the potential inadequacy of our current business model, we may be compelled to increase the amount allocated to cover policy claims, increase premium rates or adopt tighter underwriting standards, any of which may result in a decline in new business and renewals and, as a result, could have a material adverse effect on our business, results of operations and financial condition.

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Our product development cycles are complex and subject to regulatory approval, and we may incur significant expenses before we generate revenues, if any, from new products.

Because our products are highly technical and require rigorous testing and regulatory approvals, development cycles can be complex. Moreover, development projects can be technically challenging and expensive, and may be delayed or defeated by the inability to obtain licensing or other regulatory approvals. The nature of these development cycles may cause us to experience delays between the time we incur expenses associated with research and development and the time we generate revenues, if any, from such expenses. If we expend a significant amount of resources on research and development and our efforts do not lead to the successful introduction or improvement of products that are competitive in the marketplace, this could materially and adversely affect our business and results of operations. Additionally, anticipated customer demand for a product we are developing could decrease after the development cycle has commenced. Such decreased customer demand may cause us to fall short of our sales targets, and we may nonetheless be unable to avoid substantial costs associated with the product’s development. If we are unable to complete product development cycles successfully and in a timely fashion and generate revenues from such future products, the growth of our business may be harmed.

Litigation and legal proceedings filed by or against us and our subsidiaries could have a material adverse effect on our business, results of operations and financial condition.

From time to time, we are subject to allegations, and may be party to litigation and legal proceedings relating to our business operations. Litigation and other proceedings may include complaints from or litigation by customers or reinsurers, related to alleged breaches of contract or otherwise. We expect that as our market share increases, competitors may pursue litigation to require us to change our business practices or offerings and limit our ability to compete effectively.

As is typical in the insurance industry, we continually face risks associated with litigation of various types arising in the normal course of our business operations, including disputes relating to insurance claims under our policies as well as other general commercial and corporate litigation. Although we are not currently involved in any material litigation with our customers, members of the insurance industry are periodically the target of class action lawsuits and other types of litigation, some of which involve claims for substantial or indeterminate amounts, and the outcomes of which are unpredictable. This litigation is based on a variety of issues, including sale of insurance and claim settlement practices. In addition, because we employ a technology platform to collect customer data, it is possible that customers or consumer groups could bring individual or class action claims alleging that our methods of collecting data and pricing risk are impermissibly discriminatory. We cannot predict with any certainty whether we will be involved in such litigation in the future or what impact such litigation would have on our business. If we were to be involved in litigation and it was determined adversely, it could require us to pay significant damages or to change aspects of our operations, either of which could have a material adverse effect on our financial results. Even claims without merit can be time-consuming and costly to defend, and may divert management’s attention and resources away from our business and adversely affect our business, results of operations and financial condition. Additionally, routine lawsuits over claims that are not individually material could in the future become material if aggregated with a substantial number of similar lawsuits. In addition to increasing costs, a significant volume of customer complaints or litigation could also adversely affect our brand and reputation, regardless of whether such allegations have merit or whether we are liable. We cannot predict with certainty the costs of defense, the costs of prosecution, insurance coverage or the ultimate outcome of litigation or other proceedings filed by or against us, including remedies or damage awards, and adverse results in such litigation, and other proceedings may harm our business and financial condition.

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Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.

As of December 31, 2020, we had gross federal income tax net operating losses (“NOLs”), of approximately $279 million available to offset our future taxable income, if any, prior to consideration of annual limitations that may be imposed under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), or otherwise. Of our NOLs, $142 million of losses will begin to expire in 2031 through 2040 and $137 million of losses can be carried forward indefinitely.

We may be unable to fully use our NOLs, if at all. Under Section 382 of the Code, if a corporation undergoes an “ownership change” (very generally defined as a greater than 50% change, by value, in the corporation’s equity ownership by certain stockholders or groups of stockholders over a rolling three-year period), the corporation’s ability to use its pre-ownership change NOLs to offset its post-ownership change income may be limited. We have experienced ownership changes in the past, and we may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. Future regulatory changes could also limit our ability to utilize our NOLs. To the extent we are not able to offset future taxable income with our NOLs, our net income and cash flows may be adversely affected.

The Tax Cuts and Jobs Act (the “Tax Act”), as modified by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), among other things, includes changes to U.S. federal tax rates and the rules governing NOL carryforwards. For federal NOLs arising in tax years beginning after December 31, 2017, with certain exceptions, including for insurance companies that are not life insurance companies, the Tax Act as modified by the CARES Act limits a taxpayer’s ability to utilize NOL carryforwards in taxable years beginning after December 31, 2020 to 80% of taxable income. In addition, federal NOLs arising in tax years beginning after December 31, 2017, with an exception for insurance companies that are not life insurance companies, can be carried forward indefinitely. For federal NOLs for insurance companies that are not life insurance companies subject to taxation under Part 2 of subchapter L of the Code, NOLs may be carried forward for 20 taxable years regardless of when they arise. The income of insurance companies that are not life insurance companies is generally not subject to a percentage limitation for offset by group NOLs. Deferred tax assets for NOLs will need to be measured at the applicable tax rate in effect when the NOLs are expected to be utilized. The new limitation on use of NOLs may significantly impact our ability to utilize our NOLs to offset taxable income in the future. In addition, for state income tax purposes, there may be periods during which the use of net operating loss carryforwards is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. For example, California recently imposed limits on the usability of California state net operating losses to offset taxable income in tax years beginning after 2019 and before 2023.

Our enterprise software business unit has limited operating history, which makes it difficult to forecast operating results from the business unit, and we may not achieve the expected operating results in the future.

We established the enterprise software business unit in 2018 and signed its first customer the same year. Since then, we have seen a growth in revenue and deployments. However, as a result of its limited operating history, our ability to forecast future operating results from this business unit, including revenues, cash flows and profitability, is limited and subject to many uncertainties. The historical revenue growth in this business unit should not be considered indicative of its future performance.

Furthermore, the enterprise business unit’s revenue and customer growth could slow or decline for a number of reasons, including slowing demand for its products, increased competition, changes to technology, a decrease in growth in the overall market, or our failure, for any reason, to continue to take advantage of growth opportunities. Moreover, we have encountered and will continue to encounter a number of risks and uncertainties frequently experienced by growing companies in the technology industry, such as the risks and uncertainties described in this Quarterly Report on Form 10-Q. If our assumptions regarding these risks and uncertainties are incorrect or change due to changes in our market, or if we do not address these risks successfully, the enterprise business unit’s operating and financial results could differ materially from our expectations and this business unit could suffer. 

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Our enterprise software business has relied on, and is expected to continue to rely on, orders from a relatively small number of customers for a substantial portion of our revenue, and the loss of any of these customers would significantly harm our operating and financial results

Our revenue is dependent on orders from customers in the property and casualty (“P&C”) insurance industry, which may be adversely affected by economic, environmental, social, and geo-political conditions. We currently charge customers a license fee for our enterprise software that is proportional to the size of their business. This means we can expect to make more revenue from one large-sized customer (as measured by the size of the customer’s business) than from several small-sized customers (as measured by the size of their business). We currently rely on and expect to continue to rely on a relatively small number of large-sized customers to account for a majority of our revenue. As a result, if we fail to successfully sell our products and services to one or more of these large-sized customers in any particular period or fail to identify additional potential large-sized customers, or such customers purchase fewer of our products or services, defer or cancel purchase orders for any reason, fail to renew their license or subscription agreements or otherwise terminate their relationship with us for any reason, the results of operations and financial condition of the enterprise business unit would be significantly harmed.

Our Metromile Enterprise business may cost more to operate than anticipated.

Metromile Enterprise has historically generated more cash than operating expenses due to prepaid revenue and service fees associated with signed deployments. As customer deployments increase, customers request new features, and upgrades and investments are required, we may need to accelerate our spend meaningfully and this could adversely impact our operating income.

The market in which the enterprise software business operates is highly competitive, and if we do not compete effectively, our business, our financial condition, and results of operations could be harmed

The market in which our enterprise software business operates is rapidly evolving and highly competitive. As it continues to mature and evolve, existing competitors will continue to introduce new, innovative products, and new competitors will continue to enter, thereby further intensifying competition.

We face competition from a number of sources:

● Large, well-established, P&C software providers that have been selling into the P&C industry for quite some time seeking to introduce new features or launch product(s) that mimic the functionality of some of our product(s);

● Large, well-established, custom software development and professional services companies offering bespoke software that competes with some or all of our enterprise software products; and

● New or emerging entrants seeking to develop competing technology products.

We compete based on a number of factors, including innovativeness of our products, demonstrable breadth of use cases, maturity of software, speed of deployment, total cost of ownership of our products, customer service and support, brand recognition of the core Metromile business and ease of implementation. Some of our competitors have substantially greater customer relationships, and financial, technical and other resources than we do, and may be able to respond more effectively than us to new opportunities, technologies and customer needs. As a result, competition may negatively impact our ability to attract new customers or retain existing ones, or put downward pressure on our prices, any of which could materially harm our business, results of operations and financial condition.

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Our enterprise software products expose us to liability associated with customer contracts and the use of their customers data.

Metromile Enterprise is a cloud-based subscription software solution provided to global P&C insurers. Through the deployment of this service, insurers may share or provide Metromile with customer data or aggregated data that reveals personally identifying information about the insurers’ customers. This data exposes us to material liability if it is publicly disclosed, copied, or used in an inadvertent way that violates the terms of our contract with our enterprise business unit’s customers, or their terms of service with their customers, or state or national laws.

We may become subject to intellectual property disputes or other claims of infringement, which are costly and may subject us to significant liability and increased costs of doing business.

We compete in a market where there are a large number of patents, copyrights, trademarks, trade secrets, and other intellectual and proprietary rights, as well as disputes regarding infringement of these rights. In particular, leading companies in the software industry own large numbers of patents, copyrights, trademarks and trade secrets, which they may use to assert claims against us. From time to time, third parties holding such intellectual property rights, including leading companies, competitors, patent holding companies and/or non-practicing entities, may assert patent, copyright, trademark or other intellectual property claims against us.

Although we believe that our products and services do not infringe upon the intellectual property rights of third parties, we cannot assure that third parties will not assert infringement or misappropriation claims against us with respect to current or future products or services, or that any such assertions will not require us to enter into royalty arrangements or result in costly litigation, or result in us being unable to use certain intellectual property. We cannot assure that we are not infringing or otherwise violating any third-party intellectual property rights.

Any intellectual property litigation to which we become a party may require us to do one or more of the following:

● cease selling, licensing, or using products or features that incorporate the intellectual property rights that we allegedly infringe, misappropriate, or violate;

● make substantial payments for legal fees, settlement payments, or other costs or damages, including indemnification of third parties;

● obtain a license or enter into a royalty agreement, either of which may not be available on reasonable terms or at all, in order to obtain the right to sell or use the relevant intellectual property; or

● redesign the allegedly infringing products to avoid infringement, misappropriation, or violation, which could be costly, time-consuming, or impossible.

Any of these events or any adverse result in any litigation claims against us could have a material adverse effect on our business, financial condition, and results of operations.

A significant portion of our future operating profit gains are expected to arise from the growth in our enterprise software revenue, which may not be realized.

Our Metromile Enterprise business is a new and growing business. While we have several new customer deployments active or underway, there is no guarantee that these deployments will materially increase revenue if customers cancel their contracts, reduce their desired level of services, or new customers do not sign up for the services. Any of which could significantly harm our business, operating results and financial condition.

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Risks Related to Our Business Model and Industry

The insurance business, including the market for automobile, renters’ and homeowners’ insurance, is historically cyclical in nature, and we may experience periods with excess underwriting capacity and unfavorable premium rates, which could adversely affect our business.

Historically, insurers have experienced significant fluctuations in operating results due to competition, frequency and severity of catastrophic events, levels of capacity, adverse litigation trends, regulatory constraints, general economic conditions, and other factors. The supply of insurance is related to prevailing prices, the level of insured losses and the level of capital available to the industry that, in turn, may fluctuate in response to changes in rates of return on investments being earned in the insurance industry. As a result, the insurance business historically has been a cyclical industry characterized by periods of intense price competition due to excessive underwriting capacity as well as periods when shortages of capacity increased premium levels. Demand for insurance depends on numerous factors, including the frequency and severity of catastrophic events, levels of capacity, the introduction of new capital providers and general economic conditions. All of these factors fluctuate and may contribute to price declines generally in the insurance industry.

We cannot predict with certainty whether market conditions will improve, remain constant or deteriorate. Negative market conditions may impair our ability to underwrite insurance at rates we consider appropriate and commensurate relative to the risk assumed. Additionally, negative market conditions could result in a decline in policies sold, an increase in the frequency of claims and premium defaults, and an uptick in the frequency of falsification of claims. If we cannot underwrite insurance at appropriate rates, our ability to transact business will be materially and adversely affected. Any of these factors could lead to an adverse effect on our business, results of operations and financial condition.

Reinsurance may be unavailable at current levels and prices, which may limit our ability to underwrite new policies. Furthermore, reinsurance subjects us to counterparty risk and may not be adequate to protect us against losses, which could have a material effect on our results of operations and financial condition.

Reinsurance is a contract by which an insurer, which may be referred to as the ceding insurer, agrees with a second insurer, called a reinsurer, that the reinsurer will cover a portion of the losses incurred by the ceding insurer in the event a claim is made under one or more policies issued by the ceding insurer, in exchange for a premium. Our regulated insurance subsidiary, Metromile Insurance Company, obtains reinsurance to help manage its exposure to property and casualty insurance risks. Although our reinsurance counterparties are liable to us according to the terms of the reinsurance policies, we remain primarily liable to our policyholders as the direct insurers on all risks reinsured. As a result, reinsurance does not eliminate the obligation of our regulated insurance subsidiary to pay all claims, and we are subject to the risk that one or more of our reinsurers will be unable or unwilling to honor its obligations, that the reinsurers will not pay in a timely fashion, or that our losses are so large that they exceed the limits inherent in our reinsurance contracts, limiting recovery. We are also subject to the risk that under applicable insurance laws and regulations we may not be able to take credit for the reinsurance on our financial statements and instead would be required to hold separate admitted assets as reserves to cover claims on the risks that we have ceded to the reinsurer. Reinsurers may become financially unsound by the time they are called upon to pay amounts due, which may not occur for many years, in which case we may have no legal ability to recover what is due to us under our agreement with such reinsurer. Any disputes with reinsurers regarding coverage under reinsurance contracts could be time consuming, costly, and uncertain of success.

Market conditions beyond our control impact the availability and cost of the reinsurance we purchase. No assurances can be made that reinsurance will remain continuously available to us to the same extent and on the same terms and rates as is currently available, as such availability depends in part on factors outside of our control. A new contract may not provide sufficient reinsurance protection. Market forces and external factors, such as significant losses from weather and seismic events (like hurricanes or earthquakes) or terrorist attacks or an increase in capital and surplus requirements, impact the availability and cost of the reinsurance we purchase. If we were unable to maintain our current level of reinsurance or purchase new reinsurance protection in amounts that we consider sufficient at acceptable prices, we would have to either accept an increase in our catastrophe exposure, reduce our insurance underwritings, or develop or seek other alternatives.

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The unavailability of acceptable reinsurance protection would have a materially adverse impact on our business model, which depends on reinsurance companies to absorb any unfavorable variance from the level of losses anticipated at underwriting. If we are unable to obtain adequate reinsurance at reasonable rates, we would have to increase our risk exposure or reduce the level of our underwriting commitments, each of which could have a material adverse effect upon our business volume and profitability. Alternatively, we could elect to pay higher than anticipated rates for reinsurance coverage, which could have a material adverse effect upon our profitability unless policy premium rates could also be raised, in most cases subject to approval by state regulators, to offset this additional cost.

Reinsurance subjects us to risks of our reinsurers and may not be adequate to protect us against losses arising from ceded insurance, which could have a material effect on our results of operations and financial condition.

The collectability of reinsurance recoverables is subject to uncertainty arising from a number of factors, including changes in market conditions, whether insured losses meet the qualifying conditions of the reinsurance contract and whether reinsurers, their affiliates, or certain regulatory bodies have the financial capacity and willingness to make payments under the terms of a reinsurance treaty or contract. Any disruption, volatility and uncertainty in the financial reinsurance markets may decrease our ability to access such markets on favorable terms or at all. In addition, we are subject to the risk that one or more of our reinsurers will not honor its obligations, that the reinsurers will not pay in a timely fashion, or that our losses are so large that they exceed the limits inherent in our reinsurance contracts, limiting recovery. Reinsurers may become financially unsound by the time that they are called upon to pay amounts due, which may not occur for many years, in which case we may have no legal ability to recover what is due to us under our agreement with such reinsurer. In addition, any disputes with reinsurers regarding coverage under reinsurance contracts could be time consuming, costly, and uncertain of success. Our inability to collect a material recovery from a reinsurer could have a material effect on our results of operations and financial condition.

We are subject to extensive regulation and potential further restrictive regulation may increase our operating costs and limit our growth.

We are subject to extensive laws by the individual state insurance departments in the states in which we transact business. These laws are complex and subject to change. Changes may sometimes lead to additional expenses, increased legal exposure, increased required reserves or capital and surplus, delays in implementing desired rate increases or business operations, and additional limits on our ability to grow or to achieve targeted profitability. Laws to which our licensed insurance carriers and producer subsidiaries are subject include, but are not limited to:

● prior approval of transactions resulting in a change of control;

● approval of policy forms and premiums;

● approval of intercompany service agreements;

● statutory and risk-based capital solvency requirements, including the minimum capital and surplus our regulated insurance subsidiary must maintain pursuant to applicable laws and the CMA entered into as required by the Delaware Department of Insurance described above;

● establishing minimum reserves that insurance carriers must hold to pay projected insurance claims;

● required participation by our regulated insurance subsidiary in state guaranty funds;

● restrictions on the type and concentration of our regulated insurance subsidiary’s investments;

● restrictions on the advertising and marketing of insurance;

● restrictions on the adjustment and settlement of insurance claims;

● restrictions on the use of rebates to induce a policyholder to purchase insurance;

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● restrictions on the sale, solicitation and negotiation of insurance;

● restrictions on the sharing of insurance commissions and payment of referral fees;

● prohibitions on the underwriting of insurance on the basis of race, sex, religion and other protected classes;

● restrictions on our ability to use telematics to underwrite and price insurance policies, such as in California, our largest market, and other states in which we operate or may operate in the future;

● restrictions on the ability of our regulated insurance subsidiary to pay dividends to us or enter into certain related party transactions without prior regulatory approval;

● rules requiring the maintenance of statutory deposits for the benefit of policyholders;

● privacy regulation and data security;

● state-mandated premium rebates, refunds, or reductions as a result of potentially lower risk exposure due to the COVID-19 pandemic and related emergency orders;

● regulation of corporate governance and risk management; and

● periodic examinations of operations, finances, market conduct and claims practices; and required periodic financial reporting.

To the extent we decide to expand our current product offerings to include other insurance products, this would subject us to additional regulatory requirements and scrutiny in each state in which we elect to offer such products. Most states have also adopted legislation prohibiting unfair methods of competition and unfair or deceptive acts and practices in the business of insurance as well as unfair claims practices. Prohibited practices include, but are not limited to, misrepresentations, false advertising, coercion, disparaging other insurers, unfair claims settlement procedures, and discrimination in the business of insurance. Noncompliance with any of such state statutes may subject us to regulatory action by the relevant state insurance regulator, and possibly private litigation. States also regulate various aspects of the contractual relationships between insurers and independent agents as well as, in certain states, insurers and third-party administrators.

Although state insurance regulators have primary responsibility for administering and enforcing insurance regulations in the United States, such laws and regulations are further administered and enforced by a number of additional governmental authorities, each of which exercises a degree of interpretive latitude, including state securities administrators; state attorneys general as well as federal agencies including the SEC, the Financial Industry Regulatory Authority, the Federal Reserve Board, the Federal Insurance Office, the U.S. Department of Labor, the U.S. Department of Justice and the National Labor Relations Board. Consequently, compliance with any particular regulator’s or enforcement authority’s interpretation of a legal issue may not result in compliance with another’s interpretation of the same issue, particularly when compliance is judged in hindsight. Such regulations or enforcement actions are often responsive to current consumer and political sensitivities, which may arise after a major event. Such rules and regulations may result in rate suppression, limit our ability to manage our exposure to unprofitable or volatile risks, or lead to fines, premium refunds or other adverse consequences. The federal government also may regulate aspects of our businesses, such as the protection of consumer confidential information or the use of consumer insurance (credit) scores to underwrite and assess the risk of customers under the Fair Credit Reporting Act (“FCRA”). Among other things, the FCRA requires that insurance companies (i) have a permissible purpose before obtaining and using a consumer report for underwriting purposes and (ii) comply with related notice and recordkeeping requirements. Failure to comply with federal requirements under the FCRA or any other applicable federal laws could subject us to regulatory fines and other sanctions. In addition, given our short operating history to-date and rapid rate of growth, we are vulnerable to regulators identifying errors in the policy forms we use, the rates we charge, with respect to our customer communications. As a result of such noncompliance, regulators could impose fines, rebates or other penalties, including cease-and-desist orders with respect to our operations in an individual state, or all states, until the identified noncompliance is rectified.

In addition, there is risk that any particular regulator’s or enforcement authority’s interpretation of a legal issue or the scope of a regulator’s authority may change over time to our detriment. There is also a risk that changes in the overall legal environment may cause us to change our views regarding the actions we need to take from a legal risk management perspective. This would necessitate changes to our practices that may adversely impact our business. Furthermore, in some cases, these laws and regulations are designed to protect or benefit the interests of a specific constituency rather than a range of constituencies. State insurance laws and regulations are generally intended to protect the interests of purchasers or users of insurance products, rather than the holders of securities that we issue. For example, state insurance laws are generally prescriptive with respect to the content and timeliness of notices we must provide policyholders. Failure to comply with state insurance laws and regulations in the future could have a material adverse effect on our business, operating results and financial condition.

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Additionally, the federal government could pass a law expanding its authority to regulate the insurance industry, expanding federal regulation over our business to our detriment. These laws and regulations may limit our ability to grow, to raise additional capital or to improve the profitability of our business.

Our ability to retain state licenses depends on our ability to meet licensing requirements established by the NAIC and adopted by each state, subject to variations across states. If we are unable to satisfy the applicable licensing requirements of any particular state, we could lose our license to do business in that state, which would result in the temporary or permanent cessation of our operations in that state. Alternatively, if we are unable to satisfy applicable state licensing requirements, we may be subject to additional regulatory oversight, have our license suspended, or be subject to the seizure of assets. Any such events could adversely affect our business, results of operations or financial condition.

A regulatory environment that requires rate increases to be approved and that can dictate underwriting practices and mandate participation in loss sharing arrangements may adversely affect our results of operations and financial condition.

From time to time, political events and positions affect the insurance market, including efforts to suppress rates to a level that may not allow us to reach targeted levels of profitability. For example, if our loss ratio compares favorably to that of the industry, state or provincial regulatory authorities may impose rate rollbacks, require us to pay premium refunds to policyholders, or challenge or otherwise delay our efforts to raise rates even if the property and casualty industry generally is not experiencing regulatory challenges to rate increases. Such challenges affect our ability to obtain approval for rate changes that may be required to achieve targeted levels of profitability and returns on equity. In particular due to the COVID-19 pandemic, state regulators and legislators are under increased political pressure to provide financial relief to policyholders through premium rebates or requiring insurers to pay claims arising from COVID-19 related losses, regardless of the applicable policy’s exclusions.

In addition, certain states have enacted laws that require an insurer conducting business in that state to participate in assigned risk plans, reinsurance facilities and joint underwriting associations. Certain states also require insurers to offer coverage to all consumers, often restricting an insurer’s ability to charge the price it might otherwise charge. In these markets, we may be compelled to underwrite significant amounts of business at lower-than-desired rates, possibly leading to an unacceptable return on equity. Laws and regulations of many states also limit an insurer’s ability to discontinue writing some or all of its business or to withdraw from one or more lines of insurance, except pursuant to a plan that is approved by the state insurance department. Additionally, as addressed above, certain states require insurers to participate in guaranty funds for impaired or insolvent insurance companies. These funds periodically assess losses against all insurance companies doing business in the state. Our results of operations and financial condition could be adversely affected by any of these factors.

State insurance regulators impose additional reporting requirements regarding enterprise risk on insurance holding company systems, with which we must comply as an insurance holding company.

In the past decade, various state insurance regulators have increased their focus on risks within an insurer’s holding company system that may pose enterprise risk to the insurer. In 2012, the NAIC adopted significant amendments to the Insurance Holding Company Act and related regulations (the “NAIC Amendments”). The NAIC Amendments are designed to respond to perceived gaps in the regulation of insurance holding company systems in the United States. One of the major changes is a requirement that an insurance holding company system’s ultimate controlling person submit annually to its lead state insurance regulator an “enterprise risk report” that identifies activities, circumstances or events involving one or more affiliates of an insurer that, if not remedied properly, are likely to have a material adverse effect upon the financial condition or liquidity of the insurer or its insurance holding company system as a whole. As the ultimate controlling person in our insurance holding company system, we are required to file an annual enterprise risk report in one or more states. Other changes include the requirement that a controlling person submit prior notice to its domiciliary insurance regulator of a divestiture of control, having detailed minimum requirements for cost sharing and management agreements between an insurer and its affiliates and expanding of the agreements between an insurer and its affiliates to be filed with its domiciliary insurance regulator, including states in which the insurer is commercially domiciled. The NAIC Amendments must be adopted by the individual state legislatures and insurance regulators in order to be effective, and many states have already done so.

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In 2012, the NAIC also adopted the Risk Management and Own Risk and Solvency Assessment Model Act (the “ORSA Model Act”). The ORSA Model Act, as adopted by the various states, requires an insurance holding company system’s Chief Risk Officer to submit annually to its lead state insurance regulator an Own Risk and Solvency Assessment Summary Report (“ORSA”). The ORSA is a confidential internal assessment appropriate to the nature, scale and complexity of an insurer, conducted by that insurer of the material and relevant risks identified by the insurer associated with an insurer’s current business plan and the sufficiency of capital resources to support those risks. The ORSA Model Act must be adopted by the individual state legislature and insurance regulators in order to be effective. We cannot predict the impact, if any, that any other regulatory requirements may have on our business, financial condition or results of operations.

There is also risk that insurance holding company systems may become subject to group capital requirements at the holding company level. The NAIC is currently working to develop a group capital calculation framework that regulators may use for informational purposes. As envisioned, the framework is intended to complement the current holding company analytics framework by providing additional information to the lead state regulator for use in assessing group risks and capital adequacy. The NAIC has not promulgated a model law or regulation on this subject.

The increasing adoption by states of cybersecurity regulations could impose additional compliance burdens on us and expose us to additional liability.

In response to the growing threat of cyber-attacks in the insurance industry, certain jurisdictions have begun to consider new cybersecurity measures, including the adoption of cybersecurity regulations. On October 24, 2017, the NAIC adopted its Insurance Data Security Model Law, intended to serve as model legislation for states to enact in order to govern cybersecurity and data protection practices of insurers, insurance agents, and other licensed entities registered under state insurance laws. Alabama, Connecticut, Delaware, Indiana, Iowa, Louisiana, Maine, Michigan, Mississippi, New Hampshire, North Dakota, Ohio, South Carolina and Virginia have adopted versions of the Insurance Data Security Model Law, each with a different effective date, and other states may adopt versions of the Insurance Data Security Model Law in the future. The New York Department of Financial Services has promulgated its own Cybersecurity Requirements for Financial Services Companies that is not based upon the Insurance Data Security Model Law and requires insurance companies to establish and maintain a cybersecurity program and implement and maintain cybersecurity policies and procedures with specific requirements. In addition, some jurisdictions, such as California, Colorado, Massachusetts, Nevada, and Virginia have enacted more generalized data security laws that apply to certain data that we process. Although we take steps to comply with financial industry cybersecurity regulations and other data security laws and believe we are materially compliant with their requirements, our failure to comply with new or existing cybersecurity regulations could result in material regulatory actions and other penalties. In addition, efforts to comply with new or existing cybersecurity regulations could impose significant costs on our business, which could materially and adversely affect our business, financial condition or results of operations.

We rely on technology and intellectual property from third parties for pricing and underwriting our insurance policies, handling claims and maximizing automation, the unavailability or inaccuracy of which could limit the functionality of our products and disrupt our business.

We use technology and intellectual property licensed from unaffiliated third parties in certain of our products, and we may license additional third-party technology and intellectual property in the future. Any errors or defects in this third-party technology and intellectual property could result in harm to our brand and business. In addition, licensed technology and intellectual property may not continue to be available on commercially reasonable terms, or at all.

Further, although we believe that there are currently adequate replacements for the third-party technology and intellectual property we presently use, the loss of our right to use any of this technology and intellectual property could result in delays in producing or delivering affected products until equivalent technology or intellectual property is identified, licensed or otherwise procured, and integrated. Our business would be disrupted if any technology and intellectual property we license from others or functional equivalents of this software were either no longer available to us or no longer offered to us on commercially reasonable terms or prices. In either case, we would be required either to attempt to redesign our products to function with technology and intellectual property available from other parties or to develop these components ourselves, which would result in increased costs and could result in delays in product sales and the release of new product offerings. Alternatively, we might be forced to limit the features available in affected products. Any of these results could harm our business, results of operations and financial condition.

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We are subject to payment processing risk.

We currently rely exclusively on one third-party vendor to provide payment processing services, including the processing of payments from credit cards and debit cards, and our business would be disrupted if this vendor refuses to provide these services to us and we are unable to find a suitable replacement on a timely basis or at all. If we or our processing vendor fail to maintain adequate systems for the authorization and processing of credit card transactions, it could cause one or more of the major credit card companies to disallow our continued use of their payment products. In addition, if these systems fail to work properly and, as a result, we do not charge our customers’ credit cards on a timely basis or at all, our business, revenue, results of operations and financial condition could be harmed.

The payment methods that we offer also subject us to potential fraud and theft by criminals, who are becoming increasingly more sophisticated, seeking to obtain unauthorized access to or exploit weaknesses that may exist in the payment systems. If we fail to comply with applicable rules or requirements for the payment methods we accept, or if payment-related data are compromised due to a breach of data, we may be liable for significant costs incurred by payment card issuing banks and other third parties or subject to fines and higher transaction fees, or our ability to accept or facilitate certain types of payments may be impaired. In addition, our customers could lose confidence in certain payment types, which may result in a shift to other payment types or potential changes to our payment systems that may result in higher costs. If we fail to adequately control fraudulent credit card transactions, we may face civil liability, diminished public perception of our security measures, and significantly higher credit card-related costs, each of which could harm our business, results of operations and financial condition.

Our success depends upon the insurance industry continuing to move online at its current pace and the continued growth and acceptance of online and mobile app-based products and services as effective alternatives to traditional offline products and services.

We provide automobile insurance products through our website and our online and mobile apps that compete with traditional offline counterparts. We do not offer insurance through traditional, offline brokers or agents. We believe that the continued growth and acceptance of online products and services as well as those offered through mobile devices generally will depend, to a large extent, on the continued growth in commercial use of the internet and mobile apps, and the continued migration of traditional offline markets and industries online.

Purchasers of insurance may develop the perception that purchasing insurance products online or through a mobile app is not as effective as purchasing such products through a broker or other traditional offline methods, and the insurance market may not migrate online as quickly as (or at the levels that) we expect. Moreover, if, for any reason, an unfavorable perception develops that telematics, mobile engagement, a technology-based platform and/or bots are less efficacious than traditional offline methods of purchasing insurance, underwriting, and claims processing, or if it is perceived that our processes lead to unfair outcomes, our business, results of operations and financial condition could be adversely affected.

Our actual incurred losses may be greater than our loss and loss adjustment expense reserves, which could have a material adverse effect on our financial condition and results of operations.

Our financial condition and results of operations depend on our ability to accurately price risk and assess potential losses and loss adjustment expenses under the terms of the policies we underwrite. Reserves do not represent an exact calculation of liability. Rather, reserves represent an estimate of what the expected ultimate settlement and administration of claims will cost, and the ultimate liability may be greater than or less than the current estimate. In our industry, there is always the risk that reserves may prove inadequate since we may underestimate the cost of claims and claims administration.

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We base our estimates on our assessment of known facts and circumstances, as well as estimates of future trends in claim severity, claim frequency, judicial theories of liability, and other factors. These variables are affected by both internal and external events that could increase our exposure to losses, including changes in actuarial projections, claims handling procedures, inflation, severe weather, climate change, economic and judicial trends and legislative and regulatory changes. We regularly monitor reserves using new information on reported claims and a variety of statistical techniques to update our current estimate. Our estimates could prove to be inadequate, and this underestimation could have a material adverse effect on our financial condition.

Recorded claim reserves, including case reserves and incurred but not reported (“IBNR”), claims reserves, are based on our estimates of losses after considering known facts and interpretations of the circumstances, including settlement agreements. Additionally, models that rely on the assumption that past loss development patterns will persist into the future are used. Internal factors are considered including our experience with similar cases, actual claims paid, historical trends involving claim payment patterns, pending levels of unpaid claims, loss management programs, product mix, state mix, contractual terms, industry payment and reporting patterns, and changes in claim reporting and settlement practices. External factors are also considered, such as court decisions, changes in law and litigation imposing unintended coverage. We also consider benefits, such as the availability of multiple limits for a single loss occurrence. Regulatory requirements and economic conditions are also considered.

Because reserves are estimates of the unpaid portion of losses and expenses for events that have occurred, including IBNR losses, the establishment of appropriate reserves, including reserves for catastrophes, is an inherently uncertain and complex process that is regularly refined to reflect current estimation processes and practices. The ultimate cost of losses may vary materially from recorded reserves and such variance may adversely affect our results of operations and financial condition as the reserves and reinsurance recoverables are re-estimated.

If any of our insurance reserves should prove to be inadequate for the reasons discussed above, or for any other reason, we will be required to increase reserves, resulting in a reduction in our net income and stockholders’ equity in the period in which the deficiency is identified. Future loss experience substantially in excess of established reserves could also have a material adverse effect on future earnings and liquidity and financial rating, which would affect our ability to attract new business or to retain existing customers.

Performance of our investment portfolio is subject to a variety of investment risks that may adversely affect our financial results.

Our results of operations depend, in part, on the performance of our investment portfolio. We seek to hold a diversified portfolio of investments in accordance with our investment policy, which is routinely reviewed by the Investment Committee of our Board of Directors (the “Board”). However, our investments are subject to general economic and market risks as well as risks inherent to particular securities.

Our primary market risk exposures are to changes in interest rates. See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Quantitative and Qualitative Disclosures about Market Risk.” In recent years, interest rates have been at or near historic lows. A protracted low interest rate environment would continue to place pressure on our net investment income, particularly as it relates to fixed income securities and short-term investments, which, in turn, may adversely affect our operating results. Future increases in interest rates could cause the values of our fixed income securities portfolios to decline, with the magnitude of the decline depending on the maturity of the securities included in our portfolio and the amount by which interest rates increase. Some fixed income securities have call or prepayment options, which create possible reinvestment risk in declining rate environments. Other fixed income securities, such as asset-backed securities, carry prepayment risk or, in a rising interest rate environment, may not prepay as quickly as expected.

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The value of our investment portfolio is subject to the risk that certain investments may default or become impaired due to deterioration in the financial condition of one or more issuers of the securities we hold, or due to deterioration in the financial condition of an insurer that guarantees an issuer’s payments on such investments. Downgrades in the credit ratings of fixed maturities also have a significant negative effect on the market valuation of such securities.

Such factors could reduce our net investment income and result in realized investment losses. Our investment portfolio is subject to increased valuation uncertainties when investment markets are illiquid. The valuation of investments is more subjective when markets are illiquid, thereby increasing the risk that the estimated fair value (i.e., the carrying amount) of the securities we hold in our portfolio does not reflect prices at which actual transactions would occur.

Risks for all types of securities are managed through the application of our investment policy, which establishes investment parameters that include, but are not limited to, maximum percentages of investment in certain types of securities and minimum levels of credit quality, which we believe are within applicable guidelines established by the NAIC as it relates to the portfolio of Metromile Insurance Company. The maximum percentage and types of securities we may invest in are subject to insurance laws and regulations, which may change. Failure to comply with these laws and regulations would cause non-conforming investments to be treated as non-admitted assets for purposes of measuring statutory surplus and, in certain circumstances, we would be required to dispose of such investments.

Although we seek to preserve our capital, we cannot be certain that our investment objectives will be achieved, and results may vary substantially over time. In addition, although we seek to employ investment strategies that are not correlated with our insurance and reinsurance exposures, losses in our investment portfolio may occur at the same time as underwriting losses and, therefore, exacerbate the adverse effect of the losses on us.

Unexpected changes in the interpretation of our coverage or provisions, including loss limitations and exclusions, in our policies could have a material adverse effect on our financial condition and results of operations.

There can be no assurances that specifically negotiated loss limitations or exclusions in our policies will be enforceable in the manner we intend, or at all. As industry practices and legal, judicial, social, and other conditions change, unexpected and unintended issues related to claims and coverage may emerge. For example, many of our policies limit the period during which a customer may bring a claim, which may be shorter than the statutory period under which such claims can be brought against our customers. While these limitations and exclusions help us assess and mitigate our loss exposure, it is possible that a court or regulatory authority could nullify or void a limitation or exclusion, or legislation could be enacted modifying or barring the use of such limitations or exclusions. These types of governmental actions could result in higher than anticipated losses and loss adjustment expenses, which could have a material adverse effect on our financial condition or results of operations. In addition, court decisions, such as the 1995 Montrose decision in California, could read policy exclusions narrowly so as to expand coverage, thereby requiring insurers to create and write new exclusions. Under the insurance laws, the insurer typically has the burden of proving an exclusion applies and any ambiguities in the terms of a loss limitation or exclusion provision are typically construed against the insurer. These issues may adversely affect our business by either broadening coverage beyond our underwriting intent or by increasing the frequency or severity of claims. In some instances, these changes may not become apparent until sometime after we have issued insurance contracts that are affected by the changes. As a result, the full extent of liability under our insurance contracts may not be known for many years after a contract is issued.

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Risks Related to Ownership of Our Securities

Concentration of ownership among our existing executive officers, directors and their respective affiliates may prevent new investors from influencing significant corporate decisions.

At the Closing, our affiliates, executive officers, directors and their respective affiliates as a group beneficially owned approximately 15% of our outstanding Common Stock. As a result, these stockholders are able to exercise a significant level of control over all matters requiring stockholder approval, including the election of directors, amendment of our Certificate of Incorporation and approval of significant corporate transactions. This control could have the effect of delaying or preventing a change of control of us or changes in management and will make the approval of certain transactions difficult or impossible without the support of these stockholders.

We do not expect to declare any dividends in the foreseeable future.

We do not anticipate declaring any cash dividends to holders of Common Stock in the foreseeable future. Consequently, investors may need to rely on sales of their shares after price appreciation, which may never occur, as the only way to realize any future gains on their investment.

Provisions in our charter and Delaware law may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our Common Stock and could entrench management.

Our Certificate of Incorporation contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. These provisions include the ability of the Board to designate the terms of and issue new series of preferred shares, which may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. These anti-takeover defenses could discourage, delay or prevent a transaction involving a change in control of our company. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and cause us to take corporate actions other than those you desire.

A market for our securities may not continue, which would adversely affect the liquidity and price of our securities.

The price of our securities may fluctuate significantly due to general market and economic conditions. An active trading market for our securities may not be sustained.

We will incur significant costs and obligations as a result of being a public company.

We have only recently become a publicly traded company. As a publicly traded company, we have and will incur significant legal, accounting and other expenses that we were not required to incur in the past. These expenses will increase once we are no longer an “emerging growth company” as defined under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). In addition, new and changing laws, regulations and standards relating to corporate governance and public disclosure for public companies, including Dodd Frank, the Sarbanes-Oxley Act, regulations related thereto and the rules and regulations of the SEC and Nasdaq, have increased the costs and the time that must be devoted to compliance matters. We expect these rules and regulations will increase our legal and financial costs and lead to a diversion of management time and attention from revenue-generating activities.

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For as long as we remain an “emerging growth company” as defined in the JOBS Act, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” We may remain an “emerging growth company” until December 31, 2025 or such earlier time that we have more than $1.07 billion in annual revenues, have more than $700.0 million in market value of our Common Stock held by non-affiliates, or issue more than $1.0 billion of non-convertible debt over a three-year period. To the extent we choose not to use exemptions from various reporting requirements under the JOBS Act, or if we no longer can be classified as an “emerging growth company,” we expect that we will incur additional compliance costs, which will reduce our ability to operate profitably.

As an “emerging growth company,” we cannot be certain if the reduced disclosure requirements applicable to “emerging growth companies” will make our Common Stock less attractive to investors.

As an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including not being required to obtain an assessment of the effectiveness of our internal controls over financial reporting from our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards, which we have elected to do.

We cannot predict if investors will find our Common Stock less attractive because we will rely on these exemptions. If some investors find our Common Stock less attractive as a result, there may be a less active market for our Common Stock, our share price may be more volatile and the price at which our securities trade could be less than if we did not use these exemptions.

If we do not develop and implement all required accounting practices and policies, we may be unable to provide the financial information required of a U.S. publicly traded company in a timely and reliable manner.

As Legacy Metromile was a privately held company, it was not required to adopt all of the financial reporting and disclosure procedures and controls required of a U.S. publicly traded company. We expect that the implementation of all required accounting practices and policies and the hiring of additional financial staff will increase our operating costs and require our management to devote significant time and resources to such implementation. If we fail to develop and maintain effective internal controls and procedures and disclosure procedures and controls, we may be unable to provide financial information and required SEC reports that are timely and reliable. Any such delays or deficiencies could harm us, including by limiting our ability to obtain financing, either in the public capital markets or from private sources and damaging our reputation, which in either cause could impede our ability to implement our growth strategy. In addition, any such delays or deficiencies could result in our failure to meet the requirements for continued listing of our Common Stock on Nasdaq.

We may issue additional shares of Common Stock or other equity securities without your approval, which would dilute your ownership interest in us and may depress the market price of our common stock.

We may issue additional shares of Common Stock or other equity securities in the future in connection with, among other things, future acquisitions, repayment of outstanding indebtedness or grants under our 2021 Equity Incentive Plan (the “2021 Plan”) without stockholder approval in a number of circumstances.

Our issuance of additional Common Stock or other equity securities could have one or more of the following effects:

● our existing stockholders’ proportionate ownership interest in us will decrease;

● the amount of cash available per share, including for payment of dividends in the future, may decrease;

● the relative voting strength of each previously outstanding share of Common Stock may be diminished; and

● the market price of our Common Stock may decline.

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If our performance does not meet market expectations, the price of our securities may decline.*

If our performance does not meet market expectations, the price of our Common Stock may decline from the price of our Common Stock prior to the Closing. The trading price of our Common Stock could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control. Any of the factors listed below could have a material adverse effect on your investment in our Common Stock and our Common Stock may trade at prices significantly below the price you paid for them.

Factors affecting the trading price of our Common Stock may include:

● actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us;

● changes in the market’s expectations about our operating results;

● our operating results failing to meet market expectations in a particular period;

● changes in financial estimates and recommendations by securities analysts concerning us or the insurance industry and market in general;

● operating and stock price performance of other companies that investors deem comparable to us;

● changes in laws and regulations affecting our business;

● changes in the interpretation or enforcement of statutes and regulations affecting our business;

● commencement of, or involvement in, litigation involving us;

● changes in our capital structure, such as future issuances of securities or the incurrence of additional debt;

● the volume of shares of our Common Stock available for public sale;

● any significant change in our board or management;

● sales of substantial amounts of Common Stock by our directors, executive officers or significant stockholders or the anticipation of sales or lock-up expirations; and

● general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism.

Broad market and industry factors may depress the market price of our Common Stock irrespective of our operating performance. The stock market in general and Nasdaq have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of our securities, may not be predictable. A loss of investor confidence in the market for companies in the insurance industry or the stocks of other companies which investors perceive to be similar to us could depress our stock price regardless of our business, prospects, financial conditions or results of operations. A decline in the market price of our Common Stock also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future.

There is no guarantee that the Public Warrants may ever be in the money, and they may expire worthless.

The exercise price for our Warrants is $11.50 per share. There can be no assurance that the Public Warrants will be in the money prior to their expiration and, as such, they may expire worthless.

The terms of our Warrants may be amended in a manner that may be adverse to the holders. The Warrant Agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us provides that the terms of the Warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 65% of the then outstanding Public Warrants to make any change that adversely affects the interests of the registered holders. Accordingly, we may amend the terms of the Warrants in a manner adverse to a holder if holders of at least 65% of the then outstanding Public Warrants approve of such amendment. Our ability to amend the terms of the Warrants with the consent of at least 65% of the then outstanding Public Warrants is unlimited. Examples of such amendments could be amendments to, among other things, increase the exercise price of the Warrants, shorten the exercise period or decrease the number of shares of our Common Stock purchasable upon exercise of a Warrant.

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We may redeem your unexpired Warrants prior to their exercise at a time that is disadvantageous to you, thereby making your Warrants worthless.

We have the ability to redeem outstanding Warrants (excluding any Placement Warrants held by the Sponsor, Cantor Fitzgerald & Co (“Cantor”) or their permitted transferees) at any time after they become exercisable and prior to their expiration, at $0.01 per Warrant, provided that the last reported sales price (or the closing bid price of our Common Stock in the event the shares of our Common Stock are not traded on any specific trading day) of the Common Stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations and the like) on each of 20 trading days within the 30 trading-day period ending on the third business day prior to the date on which we send proper notice of such redemption, provided that on the date we give notice of redemption and during the entire period thereafter until the time we redeem the Warrants, we have an effective registration statement under the Securities Act covering the shares of Common Stock issuable upon exercise of the Warrants and a current prospectus relating to them is available. If and when the Warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding Warrants could force a Warrant holder: (i) to exercise its Warrants and pay the exercise price therefore at a time when it may be disadvantageous for it to do so, (ii) to sell its Warrants at the then-current market price when it might otherwise wish to hold its Warrants or (iii) to accept the nominal redemption price which, at the time the outstanding Warrants are called for redemption, will be substantially less than the market value of its Warrants.

We may not be able to timely and effectively implement controls and procedures required by Section 404 of the Sarbanes-Oxley Act of 2002 or which could have a material adverse effect on our business.

Commencing with our annual report for the year ending December 31, 2021, we are required to provide management’s attestation on internal controls. The standards required for a public company under Section 404 of the Sarbanes-Oxley Act are significantly more stringent than those required of Legacy Metromile as a privately-held company. Management may not be able to effectively and timely implement controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements that are applicable to us. If we are not able to implement the additional requirements of Section 404 in a timely manner or with adequate compliance, we may not be able to assess whether our internal controls over financial reporting are effective, which may subject us to adverse regulatory consequences and could harm investor confidence and lead to a decrease in the market price of our Common Stock.

Pursuant to the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act for so long as we are an “emerging growth company.”

Section 404 of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting, and generally requires in the same report a report by our independent registered public accounting firm on the effectiveness of our internal control over financial reporting. However, under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act until we are no longer an “emerging growth company.” We will be an “emerging growth company” until the earlier of (1) the last day of the fiscal year (a) following September 8, 2025, the fifth anniversary of INSU’s IPO, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Common Stock that is held by non-affiliates exceeds $700.0 million as of the last business day of our prior second fiscal quarter, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. Accordingly, until we cease being an “emerging growth company” stockholders will not have the benefit of an independent assessment of the effectiveness of our internal control environment.

We have identified a material weakness in our internal control over financial reporting which, if not remediated, could result in material misstatements in our financial statements.

We amended and restated certain items in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 31, 2021 (the “Amended Annual Report”), including INSU’s consolidated financial statements and related disclosures as of and for the year ended December 31, 2020 (the “Restatement”). In connection with the Restatement, management re-evaluated the Company’s disclosure controls and procedures as of December 31, 2020 and identified a material weakness in internal control over financial reporting relating to the accounting treatment for certain complex financial instruments. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

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We are taking steps to remediate the identified material weakness by, among other things, devoting significant effort and resources to the remediation and improvement of our internal control over financial reporting as it relates to the accounting treatment for complex financial instruments. However, we cannot be certain that such measures will remediate the identified material weakness or that we will not identify additional material weaknesses in our internal control over financial reporting in the future.

If we are unable to remediate the identified material weakness, our ability to record, process and report financial information and required SEC reports in an accurate and timely manner could be adversely affected. Any such failure could negatively affect the market price of our Common Stock, cause investors to lose confidence in our reported financial information, subject us to litigation or investigation by the SEC or other regulatory authorities and generally materially adversely impact our business and results of operations.

Our ability to meet expectations and projections in any research or reports published by securities or industry analysts, or a lack of coverage by securities or industry analysts, could result in a depressed market price and limited liquidity for our Common Stock.

The trading market for our Common Stock is influenced by the research and reports that industry or securities analysts may publish about us, our business, our market, or our competitors. If no securities or industry analysts commence coverage of us, our stock price would likely be less than that which would obtain if we had such coverage and the liquidity, or trading volume of our Common Stock may be limited, making it more difficult for a stockholder to sell shares at an acceptable price or amount. If any analysts do cover us, their projections may vary widely and may not accurately predict the results we actually achieve. Our share price may decline if our actual results do not match the projections of research analysts covering us. Similarly, if one or more of the analysts who write reports on us downgrades our stock or publishes inaccurate or unfavorable research about our business, our share price could decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, our share price or trading volume could decline.

We may be subject to securities litigation, which is expensive and could divert management attention.

Our share price may be volatile and, in the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Litigation of this type could result in substantial costs and diversion of management’s attention and resources, which could have a material adverse effect on business, financial condition, results of operations and prospects. Any adverse determination in litigation could also subject us to significant liabilities.

Our Certificate of Incorporation provides that the Court of Chancery of the State of Delaware and the federal district courts of the United States of America will be the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our Certificate of Incorporation provides that the Court of Chancery of the State of Delaware (or, if and only if the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any state court located within the State of Delaware or, if and only if all such state courts lack subject matter jurisdiction, the federal district court for the District of Delaware) is the exclusive forum for the following claims or causes of action under Delaware statutory or common law: (a) any derivative claim or cause of action brought on our behalf; (b) any claim or cause of action for breach of a fiduciary duty owed by any of our current or former directors, officers or other employees to us or our stockholders; (c) any claim or cause of action against us or any of our current or former directors, officers or other employees, arising out of or pursuant to any provision of the Delaware General Corporation Law (the “DGCL”), our certificate of incorporation or our Bylaws; (d) any claim or cause of action seeking to interpret, apply, enforce or determine the validity of our certificate of incorporation or our Bylaws; (e) any action or proceeding as to which the DGCL confers jurisdiction to the Court of Chancery of the State of Delaware; and (f) any claim or cause of action against us or any of our current or former directors, officers or other employees that is governed by the internal-affairs doctrine, in all cases to the fullest extent permitted by law and subject to the court having personal jurisdiction over the indispensable parties named as defendants. This provision would not apply to claims or causes of action brought to enforce a duty or liability created by the Exchange Act, or any other claim for which the federal courts have exclusive jurisdiction, or the Securities Act.

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Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our Certificate of Incorporation provides that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our Certificate of Incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provision will be enforced by a court in those other jurisdictions.

These exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers and other employees. If a court were to find either exclusive-forum provision in our Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could seriously harm our business.

Changes in law or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, investments and results of operations.

We are subject to laws and regulations enacted by national, regional and local governments, including in particular, reporting and other requirements under the Exchange Act. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could result in fines, injunctive relief or similar remedies which could be costly to us or limit our ability to operate.

Risks Related to the Business Combination

We have incurred significant transaction and transition costs in connection with the Business Combination.

We have incurred and expect to incur significant, non-recurring costs in connection with consummating the Business Combination and operating as a public company following the consummation of the Business Combination. We may also incur additional costs to retain key employees. Certain expenses incurred in connection with the Merger Agreement and the transactions contemplated thereby (including the Business Combination) have been or will be paid by us. Our transaction expenses as a result of the Business Combination are currently estimated at approximately $38.0 million. The amount of the deferred underwriting commissions was not adjusted for any shares that were redeemed in connection with the Business Combination.

We may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our stock price, which could cause you to lose some or all of your investment.

Although INSU conducted due diligence on Metromile in connection with the Business Combination, this diligence may not have surfaced all material issues present in Metromile’s business. Moreover, factors outside of Metromile’s business and outside of our control may later arise. As a result of these factors, we may be forced to write down or write off assets, restructure operations, or incur impairment or other charges that could result in losses. Further, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our risk analysis. Even though these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about us or our securities. Accordingly, our securities could suffer a reduction in value. Our security holders are unlikely to have a remedy for such reduction in value, unless stockholders are able to successfully claim that the reduction in stock value was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to bring a private claim that the proxy statement relating to the Business Combination contained an actionable material misstatement or material omission.

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If the Business Combination’s benefits do not meet the expectations of investors or financial analysts, the market price of our securities may decline.

If the benefits of the Business Combination do not meet the expectations of investors or securities analysts, the market price of our securities may decline. Fluctuations in the price of our securities could contribute to the loss of all or part of your investment. Immediately prior to the Business Combination, there was no public market for Metromile’s stock and trading in the shares of our securities was not active. If an active market for our securities develops and continues, the trading price of our securities could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control. Any of the factors listed below could have a material adverse effect on your investment in our securities and our securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of our securities may not recover and may experience a further decline.

Factors affecting the trading price of our securities may include:

● actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us;

● changes in the market’s expectations about our operating results;

● the public’s reaction to our press releases, our other public announcements and our filings with the SEC;

● speculation in the press or investment community;

● success of competitors;

● our operating results failing to meet the expectation of securities analysts or investors in a particular period;

● changes in financial estimates and recommendations by securities analysts concerning us or the market in general;

● operating and stock price performance of other companies that investors deem comparable to us;

● our ability to market new and enhanced services on a timely basis;

● changes in laws and regulations affecting our business;

● commencement of, or involvement in, litigation involving us following the Business Combination;

● changes in our capital structure following the Business Combination, such as future issuances of securities or the incurrence of additional debt;

● the volume of securities available for public sale;

● any major change in the Board or management;

● sales of substantial amounts of securities by our directors, officers or significant stockholders or the perception that such sales could occur;

● the realization of any of the other risks described herein;

● additions or departures of key personnel;

● failure to comply with the requirements of Nasdaq;

● failure to comply with the Sarbanes-Oxley Act of 2002 or other laws or regulations;

● actual, potential or perceived control, accounting or reporting problems;

● changes in accounting principles, policies and guidelines; and

● general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism.

Broad market and industry factors may materially harm the market price of our securities irrespective of our operating performance. The stock market in general and Nasdaq have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of our securities, may not be predictable. A loss of investor confidence in the market for the stocks of other companies which investors perceive to be similar to the post-combination company could depress our stock price regardless of our business, prospects, financial conditions or results of operations. A decline in the market price of our securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future.

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In the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management’s attention and resources, and could also require us to make substantial payments to satisfy judgments or to settle litigation.

General Risks

Future acquisitions or investments could disrupt our business and harm our financial condition.

In the future we may pursue acquisitions or investments that we believe will help us achieve our strategic objectives. There is no assurance that such acquisitions or investments will perform as expected or will be successfully integrated into our business or generate substantial revenue, and we may overestimate cash flow, underestimate costs or fail to understand the risks of or related to any investment or acquired business. The process of acquiring a business, product or technology can also cause us to incur various expenses and create unforeseen operating difficulties, expenditures and other challenges, whether or not those acquisitions are consummated, such as:

● intense competition for suitable acquisition targets, which could increase prices and adversely affect our ability to consummate deals on favorable or acceptable terms;

● inadequacy of reserves for losses and loss adjustment expenses;

● failure or material delay in closing a transaction, including as a result of regulatory review and approvals;

● regulatory conditions attached to the approval of the acquisition and other regulatory hurdles;

● a need for additional capital that was not anticipated at the time of the acquisition;

● anticipated benefits not materializing or being lower than anticipated;

● diversion of management time and focus from operating our business to addressing acquisition integration challenges;

● transition of the acquired company’s customers;

● difficulties in integrating the technologies, operations, existing contracts and personnel of an acquired company;

● retention of employees or business partners of an acquired company;

● cultural challenges associated with integrating employees from the acquired company into our organization;

● integration of the acquired company’s accounting, management information, human resources and other administrative systems;

● the need to implement or improve controls, procedures and policies at a business that prior to the acquisition may have lacked effective controls, procedures and policies;

● coordination of product development and sales and marketing functions;

● theft of our trade secrets or confidential information that we share with potential acquisition candidates;

● risk that an acquired company or investment in new offerings cannibalizes a portion of our existing business;

● adverse market reaction to an acquisition;

● liability for activities of the acquired company before the acquisition, including patent and trademark infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities; and

● litigation or other claims in connection with the acquired company, including claims from terminated employees, users, former stockholders or other third parties.

If we are unable to address these difficulties and challenges or other problems encountered in connection with any future acquisition or investment, we might not realize the anticipated benefits of that acquisition or investment and we might incur unanticipated liabilities or otherwise suffer harm to our business generally.

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To the extent that we pay the consideration for any future acquisitions or investments in cash, it would reduce the amount of cash available to us for other purposes. Future acquisitions or investments could also result in dilutive issuances of our equity securities or the incurrence of debt, contingent liabilities, amortization expenses, increased interest expenses or impairment charges against goodwill on our consolidated balance sheet, any of which could seriously harm our business.

We expect a number of factors to cause our results of operations to fluctuate on a quarterly and annual basis, which may make it difficult to predict our future performance.

Our revenue and results of operations could vary significantly from quarter to quarter and year to year, and may fail to match periodic expectations as a result of a variety of factors, many of which are outside of our control. Our results may vary from period to period as a result of fluctuations in the number of customers purchasing our insurance products and renewing their agreements with us as well as fluctuations in the timing and amount of our expenses. In addition, the insurance industry is subject to its own cyclical trends and uncertainties, including extreme weather which is often seasonal and may result in volatility in claims reporting and payment patterns. Fluctuations and variability across the industry may also affect our revenue. As a result, comparing our results of operations on a period-to-period basis may not be meaningful, and the results of any one period should not be relied on as an indication of future performance. Our results of operations may not meet the expectations of investors or public market analysts who follow us, which may adversely affect our stock price. In addition to other risks described in these Risk Factors, and elsewhere in this Quarterly Report on Form 10-Q, factors that may contribute to the variability of our quarterly and annual results include: 

● our ability to attract new customers and retain existing customers, including in a cost-effective manner;

● our ability to accurately forecast revenue and losses and appropriately plan our expenses;

● our ability to develop and offer new products, including in a cost-effective manner;

● the effects of changes in search engine placement and prominence;

● the effects of increased competition on our business;

● our ability to successfully maintain our position in and expand in existing markets as well as successfully enter new markets;

● our ability to protect our existing intellectual property and to create new intellectual property;

● our ability to maintain an adequate rate of growth and effectively manage that growth;

● our ability to keep pace with technology changes in the insurance, mobile and automobile industries;

● the success of our sales and marketing efforts;

● costs associated with defending claims, including accident and coverage claims, intellectual property infringement claims, misclassifications and related judgments or settlements;

● the impact of, and changes in, governmental or other regulation affecting our business;

● the attraction and retention of qualified employees and key personnel;

● our ability to choose and effectively manage third-party service providers;

● our ability to identify and engage in joint ventures and strategic partnerships, both domestically and internationally;

● the effects of natural or man-made catastrophic events;

● the effectiveness of our internal controls; and

● changes in our tax rates or exposure to additional tax liabilities.

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New or changing technologies, including those impacting personal transportation, could cause a disruption in our business model, which may materially impact our results of operations and financial condition.

If we fail to anticipate the impact on our business of changing technology, including automotive technology, our ability to successfully operate may be materially impaired. Our business could also be affected by potential technological changes, such as autonomous or partially autonomous vehicles or technologies that facilitate ride, car or home sharing, or vehicles with built-in telematics features. Such changes could disrupt the demand for products from current customers, create coverage issues or impact the frequency or severity of losses, or reduce the size of the automobile insurance market, causing our business to decline. Since auto insurance constitutes substantially all of our current business, we are more sensitive than other insurers and more adversely affected by trends that could decrease auto insurance rates or reduce demand for auto insurance over time. We may not be able to respond effectively to these changes, which could have a material effect on our results of operations and financial condition.

A significant portion of our total outstanding shares of our Common Stock are restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our common stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of our Common Stock in the public market could occur at any time. We have filed a registration statement to register for resale the shares issued in the private placement that closed concurrent with the Business Combination, and certain other holders pursuant to a registration rights agreement. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our Common Stock. We are unable to predict the effect that sales may have on the prevailing market price of our Common Stock and Public Warrants.

To the extent our warrants are exercised, additional shares of our Common Stock will be issued, which will result in dilution to the holders of our Common Stock and increase the number of shares eligible for resale in the public market. Sales, or the potential sales, of substantial numbers of shares in the public market by certain selling securityholders, subject to certain restrictions on transfer until the termination of applicable lock-up periods, could increase the volatility of the market price of our Common Stock or adversely affect the market price of our Common Stock.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

Item 5. Other Information

On August 9, 2021, the Company furnished a current report on Form 8-K with the SEC that included, as Exhibit 99.1, the Company’s Letter to Shareholders announcing its financial results for the second quarter ended June 30, 2021 (the “Letter”). We subsequently identified a clerical error on page 21 of the Letter, in which the amount of premiums receivable was inadvertently reported as $18,140 rather than the correct amount, which is $18,410 (dollar amounts reported in thousands).

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ITEM 6. EXHIBITS

Exhibit No.	Description
2.1	Amendment No. 1 to the Agreement and Plan of Merger and Reorganization dated November 24, 2020, dated January 12, 2021 by and among INSU Acquisition Corp. II, INSU II Merger Sub Corp., and MetroMile, Inc. (incorporated by reference to Annex AA to the Company’s Proxy Statement/Prospectus included in the Registration Statement on Form S-4/A, filed with the Securities and Exchange Commission on January 14, 2021).
2.3	Amendment No. 2 to the Agreement and Plan of Merger and Reorganization, dated November 24, 2020, and as amended on January 12, 2021, dated February 8, 2021, by and among INSU Acquisition Corp. II, INSU II Merger Sub Corp., and MetroMile, Inc. (incorporated by reference to Exhibit 2.3 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on February 11, 2021).
3.1	Second Amended and Restated Certificate of Incorporation of the Company, dated February 9, 2021 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on February 11, 2021).
3.2	Second Amended and Restated Bylaws of the Company, dated February 9, 2021 (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on February 11, 2021).
10.1#	Offer Letter, dated April 17, 2021, by and between Metromile, Inc. and Regi Vengalil.
31.1	Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
31.2	Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
32.1*	Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	Inline XBRL Instance Document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document.
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

# Indicates management contract or compensatory plan or arrangement.

* Furnished herewith and not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	METROMILE, INC.
Date: August 10, 2021	By:	/s/ Regi Vengalil
		Regi Vengalil Chief Financial Officer (Principal Financial Officer)

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EX-10.1

Exhibit 10.1

April 16, 2021

Regi Vengalil

I am pleased to offer you a full-time position with Metromile, Inc. (the “Company” as its Chief Financial Officer commencing on or before May 24, 2021.

Duties and Responsibilities. You will report to the CEO of the Company. You shall have such job duties and responsibilities commensurate with and customary for your position, which duties may change from time-to-time as the Company’s business needs and market conditions change.

Compensation. You will be paid a starting salary of $375,000 per year (less required deductions and withholdings), which will be paid semi-monthly in accordance with the Company’s normal payroll procedures. Your position is considered “exempt” for purposes of state and federal wage-and-hour laws, which means you are not eligible for overtime pay.

Sign-on Bonus. Metromile will pay to you a one-time bonus of $50,000 (the “Sign-On Bonus”), less applicable tax withholdings, payable in the first semi-monthly payroll following your employment start date with the Company. The bonus may be used at your own discretion and will be considered taxable income. You will earn, and be permitted to retain, the full amount of the Bonus if you remain employed by the Company on your one-year anniversary of your employment start date with the Company, subject to the terms of this section. By signing below, you acknowledge and agree that should your employment with the Company terminate prior to your one-year anniversary for any reason, other than your death or disability, termination for Cause or for Good Reason, you will be required to repay the Company the full amount of the Bonus. Your signature below authorizes the Company, to the fullest extent permitted by law, to make deductions from any payment you are owed (including your final paycheck) to repay all or a portion of the sign-on Bonus. You agree that, if such deductions do not fully cover the repayment of the sign-on Bonus that is owed to the Company under this section, you will pay the Company the remaining balance within 90 days of your termination of employment.

Benefits. You will be eligible to participate in the Company’s Flexible Time Away policy as outlined in the employee handbook. In addition, as a regular, full-time employee of the Company, you will be eligible to participate in the employee benefit plans and programs currently and hereafter maintained by the Company and generally available to similarly situated senior employees of the Company. Your participation in such plans and programs is subject in each case to the terms and conditions of the plan or program in question, including any eligibility requirements for the plan or program.

At-Will Employment. Your employment with the Company is at will. This means that either you or the Company may terminate your employment at any time, for any reason. Should you choose to resign, the Company appreciates you providing two weeks’ written notice of your resignation.

Restricted Stock Units. If you decide to join the Company, it will be recommended to our Board of Directors (“Board”) that the Company grant you the equity awards below, subject to the Board’s approval. For purposes of determining the number of shares subject to grants denominated in dollars, the number of shares will be determined by dividing the dollar value of the grant by the volume weighted average pricing of the shares of the Company’s common stock on the Nasdaq Stock Market for the 30-calendar day period preceding your start date, rounded down to the nearest whole share.

(a) Time-Based Restricted Stock Units. A time-based restricted stock unit award (“Time-Based RSUs”) valued at $2,500,000 granted under the Metromile, Inc. 2021 Equity Incentive Plan (the “Plan”). The Time-Based RSUs shall be subject to time-based vesting, with a vesting commencement date corresponding to your start date with the Company. The grant shall be satisfied annually over four (4) years following the grant date, with 25% of the shares vesting in the quarter corresponding to the first anniversary of your hire date and the remaining 75% vesting quarterly thereafter, in all cases subject to your continued employment with the Company on each such vesting date.

(b) Performance-Based Restricted Stock Units. A performance-based vesting restricted stock unit award valued at $2,500,000 granted under the Plan (the “Performance-Based RSUs”). The Performance- shall vest as set forth on Exhibit A, and shall have a term of five years (from the grant date of such Performance-Based RSUs).

The Time-Based RSUs and Performance-Based RSUs shall provide for an automatic sell-to-cover arrangement in respect of applicable withholding taxes following the first release of shares from the Lockup (as defined in Exhibit A). Shares in respect of any vested portion of the Time-Based RSUs and Performance-Based RSUs shall be delivered to you as soon as reasonably practicable following the applicable vesting date but in no event later than two and one-half months after the end of the calendar year following the calendar year in which such Time-Based RSUs or Performance-Based RSUs, as applicable, vest. The Time-Based RSUs and Performance-Based RSUs shall also be subject to the provisions of the Plan and the applicable award agreement, provided, however, that the Company’s standard forms shall be revised to provide that any clawbacks for RSUs adopted by the Company shall be limited to those required to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law.

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No right to any RSU or shares is earned or accrued until such time that vesting occurs, and the grant does not confer any right to continued vesting (except as provided herein) or employment.

Background Check and Form I-9. The Company reserves the right to conduct background checks on all of its potential employees. Your job offer, therefore, is contingent on your consent to such background check and your clearance of the check. For purposes of federal immigration law, you will be required to provide to the Company documentary evidence of your identity and eligibility for employment in the United States. Such documentation must be provided to us within three (3) business days of your date of hire, or our employment relationship with you may be terminated.

Disclosure of Prior Relevant Agreements. You must disclose to the Company any and all agreements relating to your prior employment that may affect your eligibility to be employed by the Company or limit the manner in which you may be employed. It is the Company’s understanding that any such agreements will not prevent you from performing the duties of your position, and you represent that such is the case. Moreover, you agree that, during the term of your employment with the Company, you will not engage in any other employment, occupation, consulting or other business activity directly related to the business in which the Company is now involved or becomes involved during the term of your employment, and you will not engage in any other activities that conflict with your obligations to the Company, other than your service on the board of directors of Porch and your involvement with not-for-profit, industry, professional and educational activities to the extent they do not materially interfere with your responsibilities to the Company or your ability to obtain appropriate required clearance from a regulatory body. Similarly, you agree not disclose any third party confidential information to the Company, including that of your former employer. You further agree that you will not use any such information in performing your duties for the Company.

Agreement to Abide by Company Policies. As a Company employee, you will be expected to abide by the Company’s policies, rules, and standards. You will be required to sign an acknowledgment that you have read and understand the Company’s policies and rules of conduct which are included in the Company Handbook (which the Company will soon distribute).

At-Will Employment, Confidential Information, Invention Assignment and Arbitration Agreement (“Confidential Information and Arbitration Agreement”). As a condition of your employment, you will be required to sign and comply with the Company’s At-Will Employment, Confidential Information, Invention Assignment and Arbitration Agreement which requires, among other provisions, the assignment of patent rights to any invention made during your employment at the Company, and non-disclosure of Company proprietary information. As set forth more fully in the Confidential Information and Arbitration Agreement, in the event of any dispute or claim relating to or arising out of our employment relationship, you and the Company agree that (i) any and all disputes between you and the Company shall be fully and finally resolved by binding arbitration, (ii) you are waiving any and all rights to a jury trial (but all court remedies will be available in arbitration), (iii) all disputes shall be resolved by a neutral arbitrator who shall issue a written opinion, (iv) the arbitration shall provide for adequate discovery, and (v) the Company shall pay all the arbitration fees, except an amount equal to the filing fees you would have paid had you filed a complaint in a court of law. Please note that we must receive your executed Confidential Information and Arbitration Agreement before your first day of employment.

-3-

Severance in the Event of Qualifying Termination Absent a Change of Control. If, at any time, the Company terminates your employment without Cause (other than as a result of your death or disability) or you resign for Good Reason (either such termination referred to as a “Qualifying Termination”), provided such termination or resignation constitutes a Separation from Service (as defined under Treasury Regulation Section 1.409A-1(h), without regard to any alternative definition thereunder, a “Separation from Service”), then subject to Sections below titled “Limitation on Severance Benefits / Clawback and Recovery”, “Conditions to Receipt of Severance Benefits and Accelerated Vesting” and “Return of Company Property” below and your continued compliance with the terms of this Agreement (including without limitation the Confidentiality Agreement), the Company will provide you with the following severance benefits (the “Non-CIC Severance Benefits”):

(a) Cash Severance. The Company will pay you, as cash severance, twelve (12) months of your base salary in effect as of your Separation from Service date, less standard payroll deductions and tax withholdings (the “Severance”). The Severance will be paid in installments in the form of continuation of your base salary payments, paid on the Company’s ordinary payroll dates, commencing on the Company’s first regular payroll date that is more than sixty (60) days following your Separation from Service date, and shall be for any accrued base salary for the sixty (60)-day period plus the period from the sixtieth (60th) day until the regular payroll date, if applicable, and all salary continuation payments thereafter, if any, shall be made on the Company’s regular payroll dates.

(b) COBRA Severance. The Company will continue to pay the cost of your health care coverage in effect at the time of your Separation from Service for a maximum of twelve (12) months, either by reimbursing you for or paying directly (at the Company’s discretion) your COBRA premiums to continue such coverage (the “COBRA Severance”). The Company’s obligation to pay the COBRA Severance on your behalf will cease if you obtain health care coverage from another source (e.g., a new employer or spouse’s benefit plan), unless otherwise prohibited by applicable law. You must notify the Company within two (2) weeks if you obtain coverage from a new source. This payment of COBRA Severance by the Company would not expand or extend the maximum period of COBRA coverage to which you would otherwise be entitled under applicable law. Notwithstanding the above, if the Company determines in its sole discretion that it cannot provide the foregoing COBRA Severance without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof provide to you a taxable monthly payment in an amount equal to the monthly COBRA premium that you would be required to pay to continue your group health coverage in effect on the date of your termination (which amount shall be based on the premium for the first month of COBRA coverage), which payments shall be made on the last day of each month regardless of whether you elect COBRA continuation coverage and shall end on the earlier of (x) the date upon which you obtain other coverage or (y) the last day of the twelfth (12th) calendar month following your Separation from Service date.

-4-

Severance in the Event of Qualifying Termination in Connection with a Change of Control. In the event of a Qualifying Termination that occurs within three (3) months prior to or within twelve (12) months following the closing of a Change of Control (as defined below), provided such Qualifying Termination constitutes a Separation from Service, then subject to Sections below “Limitation on Severance Benefits / Clawback and Recovery”, “Conditions to Receipt of Severance Benefits and Accelerated Vesting” and “Return of Company Property” and your continued compliance with the terms of this Agreement (including without limitation the Confidentiality Agreement), then the Company will provide you with the following severance benefits (the “CIC Severance Benefits”): (i) the Severance in the form and as set forth in Section above titled “Severance in the Event of Qualifying Termination Absent a Change of Control” (ii) the COBRA Severance, in the form and as set forth in Section above titled “Severance in the Event of Qualifying Termination Absent a Change of Control”; and (iii) the Company shall accelerate the vesting of any then-unvested Time-Based RSUs such that one hundred percent (100%) of such shares shall be deemed satisfied as of your Separation from Service date (the “Accelerated Vesting”).

Limitation on Severance Benefits / Clawback and Recovery. Under no circumstances will you be able to receive both the Non-CIC Severance Benefits and the CIC Severance Benefits. Any and all Non-CIC Severance Benefits and CIC Severance Benefits provided under this Agreement will be subject to recoupment in accordance with any clawback policy that the Company is required to adopt pursuant to the listing standards of any national securities exchange or association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law. In addition, the Board may impose such other clawback, recovery or recoupment provisions as the Board determines necessary to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law, including but not limited to a reacquisition right in respect of previously acquired shares of common stock of the Company or other cash or property upon the occurrence of a termination of employment for Cause.

Resignation Without Good Reason; Termination for Cause; Death or Disability. If, at any time, you resign your employment without Good Reason, or the Company terminates your employment for Cause, or if either party terminates your employment as a result of your death or disability, you will receive your base salary accrued through your last day of employment, as well as any unused vacation (if applicable) accrued through your last day of employment. Under these circumstances, you will not be entitled to any other form of compensation from the Company, including any Non-CIC Severance Benefits, CIC Severance Benefits, or Accelerated Vesting, as applicable, other than your rights to the vested portion of your Options or RSUs for the common stock of the Company, as the case may be, and any other rights to which you are entitled under the Company’s benefit programs.

-5-

Conditions to Receipt of Severance Benefits and Accelerated Vesting. Prior to and as a condition to your receipt of the Non-CIC Severance Benefits, the CIC Severance Benefits, or the Accelerated Vesting, you shall execute and deliver to the Company an effective release of claims in favor of and in a form acceptable to the Company (the “Release”) within the timeframe set forth therein, but not later than forty-five (45) days following your Separation from Service date, and allow the Release to become effective according to its terms (by not invoking any legal right to revoke it) within any applicable time period set forth therein (such latest permitted

effective date, the “Release Deadline”).

Return of Company Property. Upon the termination of your employment for any reason, as a precondition to your receipt of the Non-CIC Severance Benefits, the CIC Severance Benefits, and the Accelerated Vesting, as applicable (if and as applicable), within five (5) business days after your Separation from Service Date (or earlier if requested by the Company), you must return to the Company all Company documents (and all copies thereof) and other Company property in your possession, custody or control, including, but not limited to, Company files, notes, financial and operational information, password and account information, customer lists and contact information, prospect information, product and services information, research and development information, drawings, records, plans, forecasts, pipeline reports, sales reports or other reports, payroll information, spreadsheets, studies, analyses, compilations of data, proposals, agreements, sales and marketing information, personnel information, specifications, code, software, databases, computer-recorded information, tangible property and equipment (including, but not limited to, computers, facsimile machines, mobile telephones, tablets, handheld devices, and servers), credit cards, entry cards, identification badges and keys, and any materials of any kind which contain or embody any proprietary or confidential information of the Company, and all reproductions thereof in whole or in part and in any medium, other than any document you would be required to retain by applicable law or produce in any investigation by a regulatory or governmental agency or court of competent jurisdiction. You further agree that you will make a diligent search to locate any such documents, property and information and return them to the Company within the timeframe provided above. You also must provide the Company all passwords, log-ins, administrative access, and any other information or access for and relating to any Company computer or other device that you have used to access or use the Company’s network, as well as any Company database or Company accounts with third parties which you established, administered, or to which you had access, and must terminate your access to such network and accounts and otherwise comply with any Company requests regarding all such access and accounts. In addition, if you have used any personal computer, server, or email system to receive, store, review, prepare or transmit any confidential or proprietary data, materials or information of the Company, then within five (5) business days after your Separation from Service date (or earlier if requested by the Company) you must provide the Company with a computer-useable copy of such information and permanently delete and expunge such confidential or proprietary information from those systems without retaining any reproductions (in whole or in part); and you agree to provide the Company access to that portion of your system containing or which contained such information, as requested, to verify that the necessary copying and deletion is done. If requested, you shall deliver to the Company a signed statement certifying compliance with this Section prior to the receipt of the Non-CIC Severance Benefits, the CIC Severance Benefits, or the Accelerated Vesting, as applicable.

-6-

Definitions. For purposes of this Agreement, the following terms shall have the following meanings:

“Cause” for termination will mean your: (a) commission or conviction (including a guilty plea or plea of nolo contendere) of any felony or any other crime involving fraud, dishonesty or moral turpitude; (b) commission or attempted commission of or participation in a fraud or act of dishonesty or misrepresentation against the Company; (c) material breach of your duties to the Company; (d) intentional damage to any property of the Company causing material harm to the Company; (e) gross misconduct, or other material violation of Company policy that causes, or reasonably could be anticipated to cause, harm; (f) material violation of any written and fully executed contract or agreement between you and the Company, including without limitation, material breach of your Confidentiality Agreement, or of any Company policy, or of any statutory duty you owe to the Company The determination that a termination is for Cause shall be made by the Company in its sole discretion.

You shall have “Good Reason” for resigning from employment with the Company if any of the following actions are taken by the Company without your prior written consent: (a) a material reduction in your base salary (unless pursuant to a salary reduction program applicable generally to the Company’s similarly situated employees of not more than 25%) or reduction in your eligibility to the incentive equity grants noted above or for other bonuses and benefits; (b) a material reduction in your duties (including responsibilities and/or authorities) or title, provided, however, that a change in job position shall not be deemed a “material reduction” in and of itself unless your new duties are materially reduced from the prior duties; or (c) relocation of your principal place of employment to a place that increases your one-way commute by more than 25 miles as compared to your then-current principal place of employment immediately prior to such relocation. In order to resign for Good Reason, you must provide written notice to the Board within 30 days after the first occurrence of the event giving rise to Good Reason setting forth the basis for your resignation, allow the Company at least 30 days from receipt of such written notice to cure such event, and if such event is not reasonably cured within such period, you must resign from all positions you then hold with the Company not later than 30 days after the expiration of the cure period.

Entire Agreement. This letter, along with the Confidential Information and Arbitration Agreement, the Plan and any applicable Plan award agreement, set forth the entire agreement between you and the Company regarding the terms of your employment. By signing below, you are agreeing to these terms, and you acknowledge and agree that you are not relying on any representations, promises or statements, oral or written, other than those contained in this letter and the Confidential Information and Arbitration Agreement. This letter, including, but not limited to, its at-will employment provision, may not be modified or amended except by a written agreement signed by the CEO of the Company and you. This offer of employment will terminate if it is not accepted, signed and returned by April 20, 2021.

-7-

To accept the Company’s offer, please sign and date this letter in the space provided below. We look forward to your acceptance of this offer and to working with you at Metromile, Inc.

Sincerely,

/s/ Dan Preston

Dan Preston, CEO

ACCEPTED AND AGREED:

/s/ Regi Vengalil	2021-04-16	May 24, 2021
Regi Vengalil	Date	Anticipated Start Date

Mailing Address: 7557 Earl Ave NW Seattle, WA 98117

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Exhibit A

Performance-Based RSU Terms

Capitalized terms that are not otherwise defined in this Exhibit A or the corresponding agreement shall have the meanings set forth in the Plan.

The terms below shall apply to your Performance-Based RSUs subject to your Continuous Service through the applicable vesting date:

1) $416,666 of the value of the Performance-Based RSUs shall vest upon the date on which the Company first achieves an active number of “policies in force” greater than or equal to 250,000, as determined by the Board in its sole discretion.

2) $416,666 of the value of the Performance-Based RSUs shall vest upon the date on which the Company first achieves an active number of “policies in force” greater than or equal to 500,000, as determined by the Board in its sole discretion.

3) $833,334 of the value of the Performance-Based RSUs shall vest upon the date on which the Company first achieves a positive operating cashflow (excluding marketing expenses, device expenses, new business underwriting expenses and reinsurance expenses) for a period of at least one financial quarter, as determined by the Board in its sole discretion and based on the Company’s books and records.

4) $833,334 of the value of the Performance-Based RSUs shall all vest upon the achievement of a $25 per share price of the Company’s common stock for any twenty (20) Trading Days within any thirty (30) Trading Day period (the “Share-Based Milestone”). Notwithstanding the foregoing, the Share-Based Milestone shall be deemed satisfied as set forth in the table below in connection with a Change of Control (as defined in the Plan) that occurs prior to February 15, 2025 in connection with which the price per share shall be the per share value paid for all of the shares of each class of common stock of the Company or any successor entity in connection with a Change of Control as of the date thereof. In the event of a stock-for-stock acquisition, the value of the acquiror’s shares shall be valued based on the volume weighted average closing price over the 60-day period ending on and including the trading day occurring on the day prior to consummation of such Change of Control.

Price per share	Percentage of Performance-Based RSUs Subject to the Share-Based Milestone Vesting
At least $25 but less than $30		33	%
At least $30 but less than $35		66	%
At least $35		100	%

-9-

If the Share-Based Milestone is not met on or before February 15, 2025, all Performance-Based RSUs that are subject to the Share-Based Milestone will be forfeited. In the event of a Change of Control, the vesting conditions for all Performance-Based RSUs, other than the Performance-Based RSUs subject to the Share-Based Milestone (which shall vest in accordance with (4) above), shall be deemed to have been achieved as of the closing of such Change of Control in the proportion set forth in the table above (e.g. if the price per share is less than $25, none of the Performance-Based RSUs shall be deemed to have been achieved, if the price per share is $35 or more, all of the Performance-Based RSUs shall be deemed to have been achieved etc.).

Notwithstanding anything in this Exhibit A to the contrary, if vesting conditions for Performance-Based RSUs are otherwise met prior to the first release of shares from any applicable lockup agreement restricting shares of the Company’s common stock (the “Lockup”), the Performance-Based RSUs will not vest until following the first release of shares from the Lockup.

Any of the share amounts and share prices for Performance-Based RSUs shall be automatically adjusted in the event of stock splits, any extraordinary dividend or other extraordinary distribution, combinations and the like occurring prior to the date of grant.

-10-

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Dan Preston, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Metromile, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  August 10, 2021	By:	/s/ Dan Preston
		Dan Preston
		Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Regi Vengalil, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Metromile, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  August 10, 2021	By:	/s/ Regi Vengalil
		Regi Vengalil
		Chief Financial Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. § 1350), Dan Preston, Chief Executive Officer of Metromile, Inc. (the “Company”), and Regi Vengalil, Chief Financial Officer of the Company, each hereby certifies, that, to the best of their knowledge:

1. The Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021, to which this Certification is attached as Exhibit 32.1 (the “Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date:  August 10, 2021	By:	/s/ Dan Preston
		Dan Preston
		Chief Executive Officer (Principal Executive Officer)
	By:	/s/ Regi Vengalil
		Regi Vengalil
		Chief Financial Officer (Principal Financial Officer)

This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Metromile, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2021	Aug. 06, 2021
Document Information Line Items
Entity Registrant Name	METROMILE, INC.
Trading Symbol	MILE
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		126,727,134
Amendment Flag	false
Entity Central Index Key	0001819035
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Document Period End Date	Jun. 30, 2021
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q2
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Shell Company	false
Entity Ex Transition Period	false
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	001-39484
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	84-4916134
Entity Address, Address Line One	425 Market Street #700
Entity Address, City or Town	San Francisco
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	94105
City Area Code	(888)
Local Phone Number	242-5204
Title of 12(b) Security	Common Stock
Security Exchange Name	NASDAQ
Entity Interactive Data Current	Yes

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Investments
Marketable securities - restricted	$ 46,637	$ 24,651
Total investments	46,637	24,651
Cash and cash equivalents	202,584	19,150
Restricted cash and cash equivalents	41,335	31,038
Receivable for securities	754
Premiums receivable	18,410	16,329
Accounts receivable	1,542	4,999
Reinsurance recoverable on paid loss		8,475
Reinsurance recoverable on unpaid loss		33,941
Prepaid reinsurance premium		13,668
Prepaid expenses and other assets	7,803	7,059
Deferred transaction costs		3,581
Deferred policy acquisition costs, net	1,615	656
Telematics devices, improvements and equipment, net	13,045	12,716
Website and software development costs, net	18,957	18,401
Digital assets, net	919
Intangible assets	7,500	7,500
Total assets	361,101	202,164
Liabilities, Convertible Preferred Stock and Stockholders’ Deficit
Loss and loss adjustment expense reserves	65,476	57,093
Ceded reinsurance premium payable		27,000
Payable to carriers - premiums and LAE, net	595	849
Unearned premium reserve	16,820	16,070
Deferred revenue	5,658	5,817
Accounts payable and accrued expenses	8,879	8,222
Notes payable		51,934
Warrant liability	17,714	83,652
Other liabilities	10,443	8,554
Total liabilities	125,585	259,191
Commitments and contingencies
Convertible preferred stock, $0.0001 par value; 89,775,268 and 10,000,000 shares authorized as of December 31, 2020, and June 30, 2021, respectively; 68,776,614 and no shares issued and outstanding as of December 31, 2020, and June 30, 2021, respectively; liquidation preference of $302,397 and $0 as of December 31, 2020, and June 30, 2021, respectively		304,469
Stockholders’ equity (deficit):
Common stock, $0.0001 par value; 111,702,628 and 640,000,000 shares authorized as of December 31, 2020, and June 30, 2021, respectively; 8,992,039 and 126,727,134 shares issued and outstanding as of December 31, 2020 and June 30, 2021, respectively	12	1
Accumulated paid-in capital	746,981	5,482
Note receivable from executive		(415)
Accumulated other comprehensive gain/(loss)	(15)	11
Accumulated deficit	(511,462)	(366,575)
Total stockholders’ (deficit) equity	235,516	(361,496)
Total liabilities, convertible preferred stock and stockholders’ deficit	$ 361,101	$ 202,164

XML

Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Statement of Financial Position [Abstract]
Convertible preferred stock, par value (in Dollars per share)	$ 0.0001	$ 0.0001
Convertible preferred stock, shares authorized	10,000,000	89,775,268
Convertible preferred stock, shares issued		68,776,614
Convertible preferred stock, shares outstanding		68,776,614
Liquidation preference (in Dollars)	$ 0	$ 302,397
Common stock par value (in Dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized	640,000,000	111,702,628
Common stock, shares issued	126,727,134	8,992,039
Common stock, shares outstanding	126,727,134	8,992,039

XML

Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Revenue
Premiums earned, net	$ 18,049	$ 2,794	$ 19,174	$ 6,221
Investment income	19	139	55	419
Other revenue	10,030	4,785	26,145	9,768
Total revenue	28,098	7,718	45,374	16,408
Costs and expenses
Losses and loss adjustment expenses	22,640	2,366	34,903	7,771
Policy servicing expense and other	5,055	4,056	9,498	8,684
Sales, marketing and other acquisition costs	25,926	(300)	73,220	3,588
Research and development	3,118	2,173	6,768	4,836
Amortization of capitalized software	2,701	2,799	5,352	5,496
Other operating expenses	16,738	3,965	25,327	9,214
Total costs and expenses	76,178	15,059	155,068	39,589
Loss from operations	(48,080)	(7,341)	(109,694)	(23,181)
Other expense
Interest expense	98	1,201	15,974	1,940
Impairment on digital asset	66		66
Increase (decrease) in fair value of stock warrant liability	(6,984)	356	19,153	666
Total other expense	(6,820)	1,557	35,193	2,606
Net loss before taxes	(41,260)	(8,898)	(144,887)	(25,787)
Net loss after taxes	$ (41,260)	$ (8,898)	$ (144,887)	$ (25,787)
Net loss per share, basic and diluted (in Dollars per share)	$ (0.33)	$ (1.00)	$ (1.43)	$ (2.90)
Weighted-average shares used in computing basic and diluted net loss per share (in Shares)	126,693,218	8,886,421	101,236,461	8,878,928

XML

Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Statement of Comprehensive Income [Abstract]
Net loss	$ (41,260)	$ (8,898)	$ (144,887)	$ (25,787)
Unrealized net gain (loss) on marketable securities	(17)	36	(26)	31
Total comprehensive loss	$ (41,277)	$ (8,862)	$ (144,913)	$ (25,756)

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Consolidated Statements of Convertible Preferred Stock and Stockholders’ (Deficit) Equity - USD ($) $ in Thousands	Convertible Preferred Stock	Common Stock	APIC	Note Receivable	Accumulated Other Comprehensive Income	Accumulated Deficit	Total
Balance at Dec. 31, 2019	$ 304,469	$ 1	$ 3,816	$ (408)	$ 60	$ (246,478)	$ (243,009)
Balance (in Shares) at Dec. 31, 2019	67,728,286	8,730,377
Retroactive application of recapitalization
Retroactive application of recapitalization (in Shares)	1,048,328	135,133
As adjusted, beginning of period	$ 304,469	$ 1	3,816	(408)	60	(246,478)	(243,009)
As adjusted, beginning of period (in Shares)	68,776,614	8,865,510
Exercises and vested portion of common stock options			47				47
Exercises and vested portion of common stock options (in Shares)		17,875
Stock-based compensation			423				423
Interest on stock purchase promissory note				(3)			(3)
Unrealized net gain(loss) on marketable securities					(5)		(5)
Net loss						(16,889)	(16,889)
Balance at Mar. 31, 2020	$ 304,469	$ 1	4,286	(411)	55	(263,367)	(259,436)
Balance (in Shares) at Mar. 31, 2020	68,776,614	8,883,385
Vested portion of common stock options			3				3
Vested portion of common stock options (in Shares)		2,577
Stock-based compensation			132				132
Interest on stock purchase promissory note				(3)			(3)
Unrealized net gain(loss) on marketable securities					36		36
Net loss						(8,898)	(8,898)
Balance at Jun. 30, 2020	$ 304,469	$ 1	4,421	(414)	91	(272,265)	(268,167)
Balance (in Shares) at Jun. 30, 2020	68,776,614	8,885,962
Balance at Dec. 31, 2020	$ 304,469	$ 1	5,482	(415)	11	(366,575)	(361,496)
Balance (in Shares) at Dec. 31, 2020	67,728,286	8,854,978
Retroactive application of recapitalization
Retroactive application of recapitalization (in Shares)	1,048,328	137,061
As adjusted, beginning of period	$ 304,469	$ 1	5,482	(415)	11	(366,575)	(361,496)
As adjusted, beginning of period (in Shares)	68,776,614	8,992,039
Exercises and vested portion of common stock options			2,059				2,059
Exercises and vested portion of common stock options (in Shares)		1,089,670
Conversion of promissory note			(415)	415
RSUs withheld for tax purposes			(422)				(422)
Stock-based compensation			3,208				3,208
Unrealized net gain(loss) on marketable securities					(9)		(9)
Exercise of convertible preferred stock warrants	$ 132,718
Exercise of convertible preferred stock warrants (in Shares)	3,974,655
Conversion of preferred stock to common	$ (437,187)	$ 7	437,187				437,194
Conversion of preferred stock to common (in Shares)	(72,751,269)	72,751,269
Business Combination and PIPE financing		$ 4	290,953				290,957
Business Combination and PIPE financing (in Shares)		43,894,156
Net loss						(103,627)	(103,627)
Balance at Mar. 31, 2021		$ 12	738,052		2	(470,202)	267,864
Balance (in Shares) at Mar. 31, 2021		126,727,134
Vested portion of common stock options			116				116
Stock-based compensation			8,813				8,813
Unrealized net gain(loss) on marketable securities					(17)		(17)
Net loss						(41,260)	(41,260)
Balance at Jun. 30, 2021		$ 12	$ 746,981		$ (15)	$ (511,462)	$ 235,516
Balance (in Shares) at Jun. 30, 2021		126,727,134

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Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Cash flows from operating activities:
Net loss	$ (144,887)	$ (25,787)
Adjustments to reconcile net loss to cash used in operating activities
Depreciation and amortization	8,189	8,281
Stock-based compensation	12,021	555
Change in fair value of warrant liability	19,153	666
Telematic devices unreturned	710	497
Amortization of debt issuance costs	11,695	166
Noncash interest and other expense	3,872	340
Changes in operating assets and liabilities
Premiums receivable	(2,081)	189
Accounts receivable	3,457	(975)
Reinsurance recoverable on paid loss	8,475	(4,169)
Reinsurance recoverable on unpaid loss	33,941	(1,413)
Prepaid reinsurance premium	13,668	(763)
Prepaid expenses and other assets	(938)	1,266
Deferred transaction costs	3,581
Deferred policy acquisition costs, net	(1,665)	(328)
Digital assets, net	(985)
Accounts payable and accrued expenses	535	(3,775)
Ceded reinsurance premium payable	(27,000)	2,374
Loss and loss adjustment expense reserves	8,383	(1,779)
Payable to carriers - premiums and LAE, net	(254)	(1,769)
Unearned premium reserve	750	898
Deferred revenue	(159)	1,230
Other liabilities	2,005	1,294
Net cash used in operating activities	(47,534)	(23,002)
Cash flows from investing activities:
Purchases of telematics devices, improvements, and equipment	(3,170)	(4,583)
Payments relating to capitalized website and software development costs	(6,182)	(7,368)
Net change in payable/(receivable) for securities	(754)	8,228
Purchase of securities	(32,626)	(3,004)
Sales and maturities of marketable securities	10,515	28,760
Net cash provided by (used in) investing activities	(32,217)	22,033
Cash flow from financing activities:
Proceeds from notes payable	2,015	25,880
Payment on notes payable	(69,351)
Proceeds from merger with INSU II, net of issuance costs	336,469
Proceeds from exercise of common stock options and warrants	4,349	49
Net cash provided by financing activities	273,482	25,929
Net increase in cash, cash equivalents, restricted cash and restricted cash equivalents	193,731	24,960
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period	50,188	42,887
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period	243,919	67,847
Supplemental cash flow data:
Cash paid for interest	3,164	1,082
Non-cash investing and financing transactions:
Net liabilities assumed in the Business Combination	45,516
Net exercise of preferred stock warrants	56,160
Net exercise of promissory note	415
Capitalized website and software development costs included in accrued liabilities at period end	274
Capitalized stock-based compensation	373	196
Reclassification of liability to equity for vesting of stock options	$ 169	$ 11

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Overview and Basis of Presentation

6 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

Overview and Basis of Presentation

1. Overview and Basis of Presentation

Metromile, Inc. (together with its consolidated subsidiaries, the “Company”) formerly known as INSU Acquisition Corp. II (“INSU”), was incorporated in Delaware on October 11, 2018. INSU was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

The registration statement for INSU’s initial public offering (“IPO”) was declared effective on September 2, 2020. On September 8, 2020 INSU consummated the IPO of 23,000,000 units (“Units”), and, with respect to the shares of Class A common stock, par value $0.0001 (the “Class A Common Stock”) included in the Units sold (the “Public Shares”), which included the full exercise by the underwriters of their over-allotment option in the amount of 3,000,000 Units, at $10.00 per Unit, generating gross proceeds of $230.0 million. Simultaneously with the closing of the IPO, INSU consummated the sale of 540,000 units (the “Placement Units”), at a price of $10.00 per Placement Unit in a private placement to the sponsor and Cantor Fitzgerald & Co. (“Cantor”), generating gross proceeds of $5.4 million. Transaction costs amounted to $14.2 million, consisting of $4.0 million in cash underwriting fees, $9.8 million of deferred underwriting fees and $0.4 million of other offering costs. Following the closing of the IPO on September 8, 2020, $230.0 million ($10.00 per Unit) from the net proceeds of the sale of the Units in the IPO and the sale of the Placement Units was placed in a trust account (the “Trust Account”), which was invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less, or in money market funds meeting certain conditions under Rule 2a-7 of the Investment Company Act, as determined by INSU.

Business Combination

On February 9, 2021, the Company consummated a merger pursuant to that certain Agreement and Plan of Merger and Reorganization, dated November 24, 2020, and as amended on January 12, 2021 and February 8, 2021 (the “Merger Agreement”), by and among INSU, INSU II Merger Sub Corp., a Delaware corporation and a direct wholly owned subsidiary of INSU (“Merger Sub”) and MetroMile, Inc., a Delaware corporation (“Legacy Metromile”), pursuant to which, among other things, Merger Sub merged with and into Legacy Metromile, with Legacy Metromile surviving the merger as a wholly owned subsidiary of the Company (the “Merger,” and together with the other transactions contemplated by the Merger Agreement, the “Business Combination”). In connection with the closing of the Business Combination (the “Closing”), the Company changed its name to Metromile, Inc., and Legacy Metromile changed its name to Metromile Operating Company. Unless the context indicates otherwise, references to “INSU” refer to the historical operations of INSU prior to the Closing, and references to the “Company,” “Metromile” and “Metromile Operating Company” refer to the historical operations of Legacy Metromile and its consolidated subsidiaries prior to the Closing and the business of the combined company and its subsidiaries following the Closing.

The Merger was accounted for as a reverse recapitalization in accordance with accounting principles generally accepted in the United States (“GAAP”). Under this method of accounting, INSU, who was the legal acquirer, is treated as the “acquired” company for financial reporting purposes and Metromile Operating Company is treated as the accounting acquirer. This determination was primarily based on the fact that Metromile Operating Company’s stockholders prior to the Merger have a majority of the voting power of the Company, Metromile Operating Company’s senior management now comprise substantially all of the senior management of the Company, the relative size of Metromile Operating Company compared to the Company, and that Metromile Operating Company’s operations comprise the ongoing operations of the Company. Accordingly, for accounting purposes, the Merger is treated as the equivalent of a capital transaction in which Metromile Operating Company issued stock for the net assets of INSU, which are stated at historical cost, with no goodwill or other intangible assets recorded, and Metromile Operating Company’s financial statements became those of the Company.

Pursuant to the Amended and Restated Certificate of Incorporation of the Company, at the closing, each share of INSU’s Class B Common Stock, par value $0.0001 per share (the “Class B Common Stock”), converted into one share of INSU’s Class A Common Stock. After the Closing and following the effectiveness of the Second Amended and Restated Certificate of Incorporation of the Company, each share of Class A Common Stock was automatically reclassified, redesignated and changed into one validly issued, fully paid and non-assessable share of the Company’s Common Stock, par value $0.0001 per share (the “Common Stock”), without any further action by the Company or any stockholder thereof.

On February 9, 2021, a number of purchasers (each, a “Subscriber”) purchased from the Company an aggregate of 17,000,000 shares of Common Stock (the “PIPE Shares”), for a purchase price of $10.00 per share and an aggregate purchase price of $170.0 million, pursuant to separate subscription agreements (each, a “Subscription Agreement”) entered into effective as of November 24, 2020. Pursuant to the Subscription Agreements, the Company gave certain registration rights to the Subscribers with respect to the PIPE Shares. The sale of PIPE Shares was consummated concurrently with the Closing.

Description of Business after the Business Combination

The Company, through Metromile Operating Company and its wholly owned subsidiary, Metromile Insurance Services LLC (the “GA Subsidiary”), sells pay-per-mile auto insurance to consumers in eight states: California, Washington, Oregon, Illinois, Pennsylvania, Virginia, New Jersey, and Arizona. Metromile Operating Company has a wholly owned subsidiary, Metromile Insurance Company (the “Insurance Company”), which focuses on property and casualty insurance. In January 2019, Metromile Operating Company formed Metromile Enterprise Solutions, LLC (“Enterprise”), a wholly owned subsidiary, which focuses on selling its insurance solution technology to third party customers.

The Insurance Company provides auto insurance to customers with premiums based on a flat rate plus an adjustable rate based on actual miles driven. To record miles driven, the GA Subsidiary may provide drivers with a telematics device, the Metromile Pulse, which plugs into a car’s on-board diagnostic system to capture mileage.

The GA Subsidiary acts as a full-service insurance General Agent (“GA”). As a full-service GA, the subsidiary provides all policy pricing, binding, and servicing (payments and customer service) for the policyholders. Until late 2016, the GA Subsidiary underwriting carrier was National General Insurance (“NGI”) and its related carriers. The GA Subsidiary began transitioning NGI-issued policies upon renewal in late 2016 to the Insurance Company and has only a small number of policies with NGI as of June 30, 2021. Policies underwritten by the Insurance Company are binded by the GA as well as through a network of independent agents.

NGI handles claims for the GA Subsidiary’s policies underwritten by NGI and its related carriers, for which it pays NGI a fee for the LAE. NGI bears the risk of loss under these policies. Accordingly, the Company has no exposure to claims that would require an accrual for those NGI-related losses.

The Insurance Company bears risk of loss under all insurance policies it underwrites. The financial statements include reserves for future claims based on actuarial estimates for the Insurance Company. The Loss and LAE reserves as of December 31, 2020 and June 30, 2021 (unaudited) were $57.1 million and $65.5 million, respectively.

Basis of Presentation

The accompanying interim unaudited consolidated financial statements have been prepared in accordance GAAP and in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). References to the Accounting Standard Codification (“ASC”) and Accounting Standard Updates (“ASU”) included hereinafter refer to the Accounting Standards Codification and Updates established by the Financial Accounting Standards Board (“FASB”) as the source of authoritative GAAP. The consolidated financial statements include the accounts of Metromile, Inc. and its subsidiaries, all of which are wholly owned. All intercompany accounts and transactions have been eliminated in consolidation.

These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2020, which are included in the Company’s Post-Effective Amendment No. 1 to Form S-1 filed with the SEC on August 9, 2021. 

Liquidity and Capital Resources

The Company’s consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has had recurring losses and an accumulated deficit since its inception, related primarily to the development of its website, technology, customer acquisition, insurance losses and other operations. The Company obtained additional funding of $310 million in 2021 in connection with the Business Combination to support its ongoing operations and fund future growth of the Company. Management has concluded that substantial doubt regarding the Company’s ability to continue as a going concern for the period August 2021 through September 2022 has been alleviated based upon the recent funding and future operational improvement plans. 

In the first quarter of 2020, the global pandemic caused by COVID-19 breached the U.S. and resulted in Shelter-In-Place orders across the country and insurance department bulletins limiting the actions that insurance carriers may take and reducing the amount of premiums that will be promptly received in the short term. These factors resulted in a significant decline in both revenues and losses of the Insurance Company. In addition, in response to these events, the Company performed a temporary reduction in force of 125 employees to further align costs with revenue during the second quarter of 2020. The Company will continue to monitor the situation closely, but given the uncertainty about the duration or magnitude of the pandemic, management cannot estimate the impact on its financial condition, operations, and workforce.

Unaudited interim financial information

The accompanying interim consolidated balance sheet as of June 30, 2021, the interim consolidated statements of operations, comprehensive loss, convertible preferred stock and stockholders’ (deficit) equity for the three months and six months ended June 30, 2020 and 2021, and cash flows for the six months ended June 30, 2020 and 2021 are unaudited. These unaudited interim consolidated financial statements are presented in accordance with the rules and regulations of the SEC and do not include all disclosures normally required in annual consolidated financial statements prepared in accordance with GAAP. In management’s opinion, the unaudited interim consolidated financial statements have been prepared on the same basis as the annual financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of June 30, 2021 and the Company’s consolidated results of operations for the three months and six months ended June 30, 2020 and 2021, and cash flows for the six months ended June 30, 2020 and 2021. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full fiscal year or any other future interim or annual periods.

Use of Estimates

The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. The Company’s principal estimates include unpaid losses and LAE reserves; the fair value of investments; the fair value of stock-based awards; the fair value of the warrant liability; premium refunds to policyholders; reinsurance recoverable on unpaid loss; and the valuation allowance for income taxes. Because of uncertainties associated with estimating the amounts, timing and likelihood of possible outcomes, actual results could differ materially from these estimates.

There have been no material changes to our significant accounting policies from our audited consolidated financial statements included in the Company’s Post-Effective Amendment No. 1 to Form S-1 filed with the SEC on August 9, 2021. 

Digital Assets, Net

During the six months ended June 30, 2021, the Company purchased an aggregate of $1.0 million in digital assets, comprised solely of bitcoin. The Company currently accounts for these digital assets as indefinite-lived intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other. The Company has ownership of and control over the purchased bitcoin asset and uses third-party custodial services to secure it. The digital assets are initially recorded at cost and are subsequently remeasured on the consolidated balance sheets at cost, net of any impairment losses incurred since acquisition.

An impairment analysis is performed at each reporting period to identify whether events or changes in circumstances, in particular decreases in the quoted prices on active exchanges, indicate that it is more likely than not that digital assets held by the Company are impaired. The fair value of digital assets is determined on a nonrecurring basis in accordance with ASC 820, Fair Value Measurement, based on quoted prices on the active exchange(s) that the Company has determined is its principal market for bitcoin (Level 1 inputs). If the carrying value of the digital asset exceeds the fair value based on the lowest price quoted in the active exchanges during the period, an impairment loss has occurred with respect to those digital assets in the amount equal to the difference between their carrying values and the price determined.

Impairment losses are recognized within Other expense in the consolidated statements of operations in the period in which the impairment is identified. The impaired digital assets are written down to their fair value at the time of impairment and this new cost basis will not be adjusted upward for any subsequent increase in fair value. Gains are not recorded until realized upon sale. There were no digital assets sales during the six months ended June 30, 2021.

Recent Issued Accounting Pronouncements

As an emerging growth company (“EGC”), the Jumpstart Our Business Startups Act (the “JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act until such time as the Company is no longer considered to be an EGC. The adoption dates discussed below reflect this election.

In February 2016, FASB issued ASU 2016-02, Leases (Topic 842). Lessees will need to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability. For income statement purposes, FASB retained a dual model, requiring leases to be classified as either operating or finance. Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines. Lessor accounting is similar to the current model but updated to align with certain changes to the lessee model and the new revenue recognition standard. The standard will be effective beginning after December 15, 2021. Early adoption is permitted. The Company is currently evaluating this new standard and the impact it will have on its consolidated financial statements.

In June 2016, FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), intended to improve the timing, and enhance the accounting and disclosure, of credit losses on financial assets. This update modified the existing accounting guidance related to the impairment evaluation for available-for-sale debt securities, reinsurance recoverables, and premiums receivables and could result in the creation of an allowance for credit losses as a contra asset account. The ASU requires a cumulative-effect change to retained earnings in the period of adoption and prospective changes on previously recorded impairments, to the extent applicable. The amendments in ASU 2016-13 are effective for fiscal years beginning after December 15, 2022. The Company is currently evaluating this new standard and believes that it will not have a material impact on the Company’s consolidated financial statements with its current investment portfolio.

In March 2020, FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions to contract modifications and hedging relationships that reference LIBOR or another reference rate expected to be discontinued. The standard is effective upon issuance through December 31, 2022 and may be applied at the beginning of the interim period that includes March 12, 2020 or any date thereafter. The Company is currently evaluating this new standard and the impact it will have on its consolidated financial statements.

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Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2021

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

2. Fair Value of Financial Instruments

Topic 820, Fair Value Measurements, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Topic 820 also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

An asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

The following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheet, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Cash and Cash Equivalents

The Company’s cash and cash equivalents are demand and money market accounts and other highly liquid investments with an original maturity of three months or less. Demand and money market accounts are at stated values. Fair values for other cash equivalents are classified as Level 1 and are based upon appropriate valuation methodology.

Marketable Securities — Available-for-sale

The Company classifies highly liquid money market funds, U.S. Treasury bonds and certificates of deposit within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets and upon models that take into consideration such market-based factors as recent sales, risk-free yield curves, and prices of similarly rated bonds. Commercial paper, corporate bonds, corporate debt securities, repurchase agreements, and asset backed securities are classified within Level 2 because they are valued using inputs other than quoted prices that are directly or indirectly observable in the market, including readily available pricing sources for the identical underlying security which may not be actively traded. The Company did not hold any securities classified within Level 3 as of December 31, 2020 and June 30, 2021 (unaudited).

Assets measured on a recurring basis at fair value, primarily related to marketable securities, included in the consolidated balance sheets as of December 31, 2020 and June 30, 2021 (unaudited) (in thousands) are set forth below:

	Fair Value Measurement at December 31, 2020
	Level 1		Level 2		Level 3		Total
Cash equivalents
Money market accounts	$	6,771	$	-	$	-	$	6,771
Total cash equivalents		6,771		-		-		6,771
Restricted cash equivalents
Money market accounts		6,201		-		-		6,201
Certificates of deposits		3,331		-		-		3,331
Total restricted cash equivalents		9,532		-		-		9,532
Marketable securities - restricted
Corporate debt securities		-		5,955		-		5,955
U.S. treasury securities		6,994		-		-		6,994
Commercial paper		-		8,791		-		8,791
Asset backed securities		-		2,911		-		2,911
Total marketable securities - restricted	$	6,994	$	17,657	$	-	$	24,651

	Fair Value Measurement at June 30, 2021 (unaudited)
	Level 1		Level 2		Level 3		Total
Cash equivalents
Money market accounts	$	196,296	$	-	$	-	$	196,296
Total cash equivalents		196,296		-		-		196,296
Restricted cash equivalents
Money market accounts		23,962		-		-		23,962
Certificates of deposits		3,331		-		-		3,331
Total restricted cash equivalents		27,293		-		-		27,293
Marketable securities - restricted
Corporate debt securities		-		4,473		-		4,473
U.S. treasury and agency securities		20,313		1,995		-		22,308
Commercial paper		-		14,681		-		14,681
Asset backed securities		-		5,175		-		5,175
Total marketable securities - restricted	$	20,313	$	26,324	$	-	$	46,637

Public and Private Warrants

At the Closing, Metromile Operating Company acquired the net liabilities from INSU, including warrants exercisable for common stock. The Company estimated the fair value of warrants exercisable for common stock measured at fair value on a recurring basis at the respective dates using the public trading price, for the Public warrants, and the Black-Scholes option valuation model, for the Private placement warrants (together with the public warrants, the “Warrants”), respectively. The Black-Scholes option valuation model inputs are based on the estimated fair value of the underlying common stock at the valuation measurement date, the remaining contractual term of the warrant, the risk-free interest rates, the expected dividends, and the expected volatility of the price of the Company’s underlying stock. These estimates, especially the expected volatility, are highly judgmental and could differ materially in the future.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. We consider our Public warrants to be Level 1 liabilities as we use publicly and readily available information to measure the fair value of the warrants. For our Private placement warrants, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date and as such are classified as Level 2 liabilities.

The table below sets forth a summary of changes in the fair value of the Company’s Level 1, Level 2, and Level 3 liabilities for the years ended December 31, 2020 and the six months ended June 30, 2021 (unaudited) (in thousands):

Balance at December 31, 2019	$	1,738
Issuance of warrant on Series E convertible preferred stock		12,620
Increase in fair value of warrant		69,294
Balance at December 31, 2020	$	83,652
Increase in fair value of warrants		47,062
Exercise of preferred stock warrants prior to Business Combination		(130,714	)
Public and Private placement Warrants acquired in Business Combination		45,623
Decrease in fair value of Public and Private placement Warrants		(27,909	)
Balance at June 30, 2021	$	17,714

The fair value of the Private placement warrants was determined using the Black-Scholes option valuation model using the following assumptions for values as of June 30, 2021:

	Estimated
	Fair Value of
	Warrants
	as of										Risk-Free			Expected
	June 30,		Exercise		Dividend						Interest			Term
	2021		Price		Yield			Volatility			Rate			(in Years)
Private placement warrants	$	770	$	11.50		0	%		65.00	%		0.79	%		4.6

In connection with the Merger, each of the Metromile Operating Company convertible preferred stock warrants outstanding as of December 31, 2020 was exercised for shares of Metromile Operating Company common stock. Therefore, there were no convertible preferred stock warrants outstanding after the Closing.

Through the three months and six months ended June 30, 2020 and 2021 (unaudited), there were no transfers to or from any Level. The carrying amounts of accounts payable, accrued expenses and notes payable approximate their fair values because of the relatively short periods until they mature or are required to be settled.

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Marketable Securities

6 Months Ended

Jun. 30, 2021

Marketable Securities Disclosure [Abstract]

Marketable Securities

3. Marketable Securities

The Company has investments in certain debt securities that have been classified as available-for-sale and recorded at fair value. These investments are included in both assets for securities with a maturity of one-year or less and assets for securities with a maturity of more than one-year. These securities are held in the Insurance Company and shown as restricted given that the transfer of these assets is subject to the approval of the state regulators. As of December 31, 2020 and June 30, 2021 (unaudited), deposits with various states consisted of bonds with carrying values of $4.9 million and $5.2 million, respectively.

When evaluating an investment for other-than-temporary impairment, the Company reviews factors such as the length of time and extent to which fair value has been below its cost basis, the financial condition of the issuer and any changes thereto, changes in market interest rates and the Company’s intent to sell, or whether it is more likely than not it will be required to sell the investment before recovery of the investment’s cost basis. As of December 31, 2020 and June 30, 2021 (unaudited), the Company does not consider any of its investments to be other-than-temporarily impaired. Unrealized gains and losses arising from the revaluation of available-for-sale securities are included in the consolidated statements of other comprehensive loss. Realized gains and losses on sales of investments are generally determined using the specific identification method and are included in the consolidated statements of operations.

The cost basis and fair value of available-for-sale securities as of December 31, 2020 and June 30, 2021 (unaudited) are presented below (in thousands):

	As of December 31, 2020
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gain		Loss		Fair Value
Marketable securities - restricted
Corporate debt securities	$	5,938	$	17	$	-	$	5,955
U.S. treasury securities		6,994		-		-		6,994
Commercial paper		8,791		-		-		8,791
Asset backed securities		2,911		-		-		2,911
Total marketable securities - restricted	$	24,634	$	17	$	-	$	24,651

	As of June 30, 2021 (unaudited)
	Amortized		Unrealized		Unrealized			Estimated
	Cost		Gain		Loss			Fair Value
Marketable securities - restricted
Corporate debt securities	$	4,473	$	-	$	-		$	4,473
U.S. treasury  and agency securities		22,319		-		(11	)		22,308
Commercial paper		14,681		-		-			14,681
Asset backed securities		5,175		-		-			5,175
Total marketable securities - restricted	$	46,648	$	-	$	(11	)	$	46,637

The amortized cost and estimated fair value of marketable securities as of December 31, 2020 and June 30, 2021 (unaudited) are shown below by contractual maturity (in thousands):  

	As of December 31, 2020
	Amortized		Estimated
	Cost		Fair Value
Due within one year	$	21,603	$	21,629
Due between one to five years		3,031		3,022
	$	24,634	$	24,651

	As of June 30, 2021 (unaudited)
	Amortized		Estimated
	Cost		Fair Value
Due within one year	$	45,898	$	45,893
Due between one to five years		750		744
	$	46,648	$	46,637

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Business Combination

6 Months Ended

Jun. 30, 2021

Business Combinations [Abstract]

Business Combination

4. Business Combination

As described in Note 1, the Business Combination was consummated on February 9, 2021 (the “Closing Date”). For financial accounting and reporting purposes under GAAP, the Business Combination was accounted for as a reverse acquisition and recapitalization, with no goodwill or other intangible asset recorded. As a result, the historical operations of Metromile Operating Company are deemed to be those of the Company. Thus, the financial statements included in this report reflect (i) the historical operating results of Metromile Operating Company prior to the Business Combination; (ii) the combined results of the Company and Metromile Operating Company following the Business Combination; (iii) the assets and liabilities of Metromile Operating Company at their historical cost; and (iv) the Company’s equity structure for all periods presented.

In accordance with guidance applicable to these circumstances, the equity structure has been restated in all comparative periods up to the Closing Date, to reflect the number of shares of the Company’s common stock issued to Metromile Operating Company stockholders in connection with the recapitalization transaction. As such, the shares and corresponding capital amounts and earnings per share related to Metromile Operating Company redeemable convertible preferred stock and Metromile Operating Company common stock prior to the Business Combination have been retroactively restated as shares reflecting the exchange ratio established in the Merger Agreement. Activity within the statement of stockholder’s equity for the issuances and repurchases of Metromile Operating Company redeemable preferred stock, were also retroactively converted to Metromile Operating Company common stock.

The following table reconciles the elements of the Business Combination to the consolidated statement of cash flows and the consolidated statement of stockholders’ equity for the six months ended June 30, 2021 (dollars in thousands).

	Recapitalization
Cash – INSU’s trust and cash (net of redemptions)	$	229,925
Cash – PIPE		170,000
Less transaction costs and advisory fees paid		31,456
Less cash payments to Metromile Operating Company stockholders		32,000
Net Business Combination and PIPE financing		336,469
Less non-cash net liabilities assumed from INSU		45,516
Net contributions from Business Combination and PIPE Financing	$	290,953

	Number of Shares
INSU Class A Common stock, outstanding prior to Business Combination		23,540,000
INSU Class B Common stock, outstanding prior to Business Combination		6,669,667
Less redemption of INSU shares		8,372
Common stock of INSU		30,201,295
Shares issued in PIPE		17,000,000
Business Combination and PIPE financing shares		47,201,295
Metromile Operating Company shares (1)		79,525,839
Total shares of common stock immediately after Business Combination		126,727,134

(1) The number of Metromile Operating Company shares was determined from the 78,313,665 shares of Metromile Operating Company common and preferred stock outstanding immediately prior to the closing of the Business Combination, which are presented net of the common and preferred stock redeemed, converted at the Exchange Ratio of 1.01547844. All fractional shares were rounded down.

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Deferred Policy Acquisition Costs, Net

6 Months Ended

Jun. 30, 2021

Deferred Policy Acquisition Costs Disclosures [Abstract]

Deferred Policy Acquisition Costs, Net

5. Deferred Policy Acquisition Costs, Net

DPAC consists of the following (in thousands):

	December 31,			June 30,
	2020			2021
				(unaudited)
Deferred policy acquisition costs	$	10,511		$	11,069
Less deferred ceding commission		(1,202	)		(95	)
Less accumulated amortization		(8,653	)		(9,359	)
Deferred policy acquisition costs, net	$	656		$	1,615

For the three months ended June 30, 2020 and 2021 (unaudited), total amortization expense was approximately $0.4 million and $0.3 million, respectively. For the six months ended June 30, 2020 and 2021 (unaudited), total amortization expense was approximately $0.8 million and $0.7 million, respectively. During all periods presented the amortization expense was included as part of sales, marketing and other acquisition costs in the Company’s consolidated statements of operations.

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Digital Assets, Net

6 Months Ended

Jun. 30, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Digital Assets, Net

6. Digital Assets, Net

In June 2021, the Company purchased and received $1.0 million of bitcoin. During the three months and six months ended June 30, 2021, the Company recorded $0.1 million of impairment losses on bitcoin. There were no realized gains or losses recognized during the three months and six months ended June 30, 2021. As of June 30, 2021, the carrying value of the Company’s bitcoin digital assets held was $0.9 million, which reflects cumulative impairments of $0.1 million. The fair market value of bitcoin held as of June 30, 2021 was $0.9 million.

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Loss and Loss Adjustment Expense Reserves

6 Months Ended

Jun. 30, 2021

Insurance [Abstract]

Loss and Loss Adjustment Expense Reserves

7. Loss and Loss Adjustment Expense Reserves

The following table provides a reconciliation of the beginning and ending reserve balances for losses and LAE, net of reinsurance recoverable, for the six months ended June 30, 2020 and 2021 (unaudited) (in thousands):

	Six Months Ended June 30,
	2020			2021
	(unaudited)
Balance at January 1	$	52,222		$	57,093
Less reinsurance recoverable		(28,837	)		(33,941	)
Net balance at January 1		23,385			23,152
Incurred related to:
Current year		6,928			33,727
Prior years		738			1,108
Total incurred		7,666			34,835
Paid related to:
Current year		2,324			9,760
Prior years		8,534			(17,249	)
Total paid		10,858			(7,489	)
Net balance at end of period		20,193			65,476
Plus reinsurance recoverable		30,250			-
Balance at end of period	$	50,443		$	65,476

These reserve estimates are generally the result of ongoing analysis of recent loss development trends and emerging historical experience. Original estimates are increased or decreased as additional information becomes known regarding individual claims. In setting reserves, the Company reviewed its loss data to estimate expected loss development. Management believes that the use of sound actuarial methodology applied to its analyses of historical experience provides a reasonable estimate of future losses. However, actual future losses may differ from the Company’s estimates, and future events beyond the control of management, such as changes in law, judicial interpretations of law and inflation, may favorably or unfavorably impact the ultimate settlement of the Company’s losses and LAE.

The anticipated effect of inflation is implicitly considered when estimating liabilities for losses and LAE. While anticipated price increases due to inflation are considered in estimating the ultimate claim costs, the increase in average severities of claims is caused by a number of factors that vary with the individual type of policy written. Future average severities are projected based on historical trends adjusted for implemented changes in underwriting standards, policy provisions, and general economic trends.

The estimation of unpaid losses and LAE reserves is based on existing factors at the date of estimation. Accordingly, future events may result in ultimate losses and LAE significantly varying from a reasonable provision as of the date of estimation. Unfavorable development of claims in future years could result in a significant negative impact on operations, stockholders’ surplus, and RBC. Such development, if not offset by other increases in stockholders’ surplus, could result in the insurance departments of the state of domicile taking regulatory actions against the Insurance Company.

During the six months ended June 30, 2021, the Company experienced unfavorable development on losses and LAE from prior accident years as a result of higher severity for the injury coverages. The Company has not had any unfavorable prior year claim experience on retrospectively rated policies. However, the business to which the development relates is subject to premium adjustments. In 2020, the Company experienced unfavorable development on losses and LAE from prior accident years as a result of adverse LAE development. The Company has not had any unfavorable prior year claim experience on retrospectively rated policies. However, the business to which the development relates is subject to premium adjustments.

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Reinsurance

6 Months Ended

Jun. 30, 2021

Reinsurance Disclosures [Abstract]

Reinsurance

8. Reinsurance

During the periods presented, the Company used reinsurance contracts to protect itself from losses due to concentration of risk and to manage its operating leverage ratios. As of June 30, 2021, the Company has commuted all of its reinsurance agreements.

In February 2021, Metromile Insurance Company entered into a settlement agreement with Horseshoe Re Limited (“Horseshoe”) to commute the reinsurance agreements with effective dates beginning May 1, 2017, May 1, 2018, and May 1, 2019. Pursuant to the agreement, Metromile Insurance Company paid approximately $9 million, net, for commutation of the underlying agreements.

In June and July 2021, Metromile Insurance Company entered into settlement agreements with Horseshoe, Partner Reinsurance Company of the U.S. (“Partner”), Topsail Reinsurance SPC Ltd. (“Topsail”), The Cincinnati Insurance Company (“Cincinnati”) and Mapfre Re (“Mapfre”) to commute the reinsurance agreements between the parties with effective dates beginning May 1, 2017, May 1, 2018, May 1, 2019, and May 1, 2020. The commutations were effective April 30, 2021. Pursuant to the settlements, Metromile Insurance Company paid approximately $6.2 million, net, for commutation of the underlying agreements out of which $4.1 million was settled with reinsurers in July 2021 and included as part of other liabilities in the Company’s consolidated balance sheets as of June 30, 2021

Prior to the above-mentioned reinsurance agreement commutations, the Company had several reinsurance agreements in place. Effective May 1, 2017, two quota-share reinsurance agreements were entered into under which 85% of the Company’s premiums and losses related to its renewal business occurring May 1, 2017 through April 30, 2018 were ceded to two unaffiliated reinsurers. Effective May 1, 2018, three quota-share reinsurance agreements were in place whereby 85% of the Company’s premiums and losses related to its second term renewal business occurring May 1, 2018 through April 30, 2019, but not covered by the earlier quota-share agreements, were ceded to three unaffiliated reinsurers. Effective May 1, 2019, four quota-share reinsurance agreements were in place whereby 85% of the Company’s premiums and losses, subject to a loss corridor, related to its new and renewal business occurring May 1, 2019 through April 30, 2020, but not covered by the earlier quota-share agreements, were ceded to four unaffiliated reinsurers. Effective May 1, 2020, five quota-share reinsurance agreements were in place whereby 85% of the Company’s premiums and losses, subject to a loss corridor for one agreement, related to its new and renewal business occurring May 1, 2020 through April 30, 2021, but not covered by the earlier quota-share agreements, were ceded to five unaffiliated reinsurers. In addition, under the reinsurance agreements effective May 1, 2017 and May 1, 2018, LAE was ceded at a fixed rate of 3% of ceded earned premium. Under the reinsurance agreement effective May 1, 2019, LAE was ceded at a fixed rate of 6% of ceded earned premium. Under the reinsurance agreement effective May 1, 2020, LAE was ceded at a fixed rate of 4.75 – 6.0% of ceded earned premium. For the reinsurance agreements effective May 1, 2017 and May 1, 2018, the Company received a 10.2% ceding commission, sliding based on loss ratios of the ceded business. For the reinsurance agreement effective May 1, 2019, the Company received a 10.0% ceding commission. For the reinsurance agreement effective May 1, 2020, the Company received a 10.0 – 11.75% ceding commission, sliding based on loss performance of the ceded business.

In addition, the Company received revenue from the reinsurers related to the acquisition costs incurred related to the ceded policies. The revenue was based on the number of policies newly ceded to the reinsurers. During the three months ended June 30, 2020 and 2021 (unaudited) the Company received $2.6 million and $1.1 million, respectively, for acquisition costs from the reinsurers, pursuant to the existing reinsurance agreements. During the six months ended June 30, 2020 and 2021 (unaudited) the Company received $7.0 million and $4.7 million, respectively, for acquisition costs from the reinsurers, pursuant to the existing reinsurance agreements. This revenue is recorded in other revenue on the consolidated statements of operations.

The insurance company was not relieved of its primary obligations to policyholders as a result of any reinsurance agreements. The credit risk associated with the Company’s reinsurance contracts was mitigated by using a diverse group of reinsurers and monitoring their financial strength ratings. The former reinsurance counterparties and their A.M. Best financial strength ratings are as follows: Mapfre (A), Cincinnati (A+), Partner (A+), Horseshoe (not rated), and Topsail (not rated). For reinsurance counterparties not rated, adequate levels of collateral were required either in the form of a letter of credit or funded trust account.

The effect of the Company’s reinsurance agreements on premiums, loss and LAE related to the insurance company for the year ended December 31, 2020 and the six months ended June 30, 2021 (unaudited) is as follows (in thousands):

	December 31, 2020
	Premium			Premium			Unearned			Losses and LAE			Loss and LAE
	Written			Earned			Premium			Incurred			Reserves
Direct	$	100,611		$	99,712		$	16,070		$	74,943		$	57,093
Ceded		(85,504	)		(84,740	)		(13,668	)		(54,010	)		(33,941	)
Net	$	15,107		$	14,972		$	2,402		$	20,933		$	23,152

	June 30, 2021 (unaudited)
	Premium			Premium			Unearned		Losses and LAE			Loss and LAE
	Written			Earned			Premium		Incurred			Reserves
Direct	$	54,330		$	53,580		$	16,820	$	49,536		$	65,476
Ceded		(19,411	)		(33,080	)		-		(14,701	)		-
Net	$	34,919		$	20,500		$	16,820	$	34,835		$	65,476

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Notes Payable, net

6 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

Notes Payable, net

9. Notes Payable, net

The following table summarizes the Company’s debt outstanding, net of issuance costs (in thousands):

	December 31,			June 30,
	2020			2021
				(unaudited)
2019 Loan and Security Agreement	$	25,000		$	-
Subordinated Note Purchase and Security Agreement		32,461			-
Paycheck Protection Program Loan		5,880			-
Principal Amount Due		63,341			-
Less: Unamortized debt issuance costs and discounts		(11,407	)		-
Notes payable, net	$	51,934		$	-

Paycheck Protection Program Loan

In April 2020, the Company was granted a loan under the Paycheck Protection Program offered by the Small Business Administration under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), section 7(a)(36) of the Small Business Act for approximately $5,900,000. The loan was evidenced by a promissory note and bore interest at 1% with payments deferred for 10 months after the covered period of 24 weeks. Monthly payments of principal and interest of approximately $330,000 would have begun in September 2021 and continued through maturity in April 2022, if required. The loan was subject to partial or full forgiveness if the Company: used all proceeds for eligible purposes; maintained certain employment levels; and maintained certain compensation levels in accordance with and subject to the CARES Act and the rules, regulations and guidance. This loan was repaid in February 2021 and is no longer outstanding.

Subordinated Note Purchase and Security Agreement

In April 2020, the Company entered into that certain Note Purchase and Security Agreement (as amended, the “Note Purchase Agreement”) with us, as issuer, certain of our subsidiaries, as guarantors, and certain affiliates of Hudson Structured Capital Management (collectively, “Hudson”) with borrowings totaling $31.6 million through December 31, 2020 in the aggregate, along with $0.9 million of capitalized payment in kind (“PIK”) interest. The transaction further provided for additional funds up to $15.0 million over time, from Hudson, the timing of which was subject to reinsurance settlement timing. The outstanding principal under the Note Purchase Agreement was due in April 2025 and bore interest at the following rates: 2% per annum payable quarterly in arrears in cash, and a varying interest rate of 9.0% to 11.0% of PIK interest. The PIK interest was based on the aggregate outstanding principal balance as follows: (i) 11.0% if the outstanding balance was less than $5.0 million; (ii) 10.0% if the outstanding balance was greater than or equal to $5.0 million but less than $10.0 million; and (iii) 9.0% if the outstanding balance was greater than or equal to $10.0 million. PIK interest represents contractually deferred interest that is added to the principal balance outstanding and due at maturity. The loan was secured by substantially all assets of the Company. As of December 31, 2020, the outstanding principal and capitalized PIK interest on the Note Purchase Agreement was $32.5 million, along with $0.6 million of accrued PIK interest not subject to capitalization as of such date. The loan was able to be prepaid in an amount equal to the outstanding principal, accrued cash and PIK interest, and the end of term fee equal to 1% of the principal amount being prepaid. This loan was repaid in March 2021 and is no longer outstanding.

As part of the Note Purchase and Security Agreement, the Company issued warrants for up to 8,669,076 of Series E convertible preferred shares, which the Company estimated to have a fair value of $12.5 million at issuance which was recorded as a discount to the debt and was amortized to interest expense over the term of the debt. These warrants were exercised in February 2021 and are no longer outstanding.

2019 Loan and Security Agreement

In December 2019, the Company entered into a Loan and Security Agreement (the “2019 Loan and Security Agreement”) with a group of lenders for a term loan in the amount of $25.0 million. Minimum payments of interest were due monthly through December 2021. Beginning in January 2022, equal payments of principal would have been due monthly in an amount necessary to fully amortize the loan by June 5, 2024. An end of term payment of $0.6 million was due at maturity or date of any prepayment. At the time of origination, the lender was granted a warrant to purchase Series E convertible preferred stock, estimated to have a fair value of $0.5 million at issuance. The warrants were exercised in February 2021 and are no longer outstanding. The loan was secured by substantially all assets of the Company. The Company was required to obtain the lender’s consent regarding certain dispositions, and changes in business, management, or ownership including mergers and acquisitions, as more fully described in the 2019 Loan Agreement. The balance outstanding net of debt issuance costs for the 2019 Loan Agreement was $24.3 million as of December 31, 2020. The loan was prepaid in February 2021 and is no longer outstanding.

The loan was able to be prepaid in an amount equal to the outstanding principal, accrued interest, and the end of term fee, plus a prepayment charge of 3% if paid in the first year after the effective date, 2% if paid in the second year after the effective date, or 1% if prepaid after the second year subsequent to the effective date.

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Commitments

6 Months Ended

Jun. 30, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments

10. Commitments

The Company leases facilities in San Francisco, California, which is the corporate headquarters, Tempe, Arizona and Boston, Massachusetts, as well as certain equipment. The leases are non-cancellable operating leases that expire on various dates through 2030.

Future minimum lease payments relating to these agreements as of June 30, 2021 (unaudited), are as follows (in thousands):

As of June 30, 2021 (unaudited)	Purchase Obligations		Leases		Total
2021 (remaining six months)	$	3,055	$	1,646	$	4,701
2022		-		3,093		3,093
2023		-		3,181		3,181
2024		-		3,190		3,190
2025		-		2,433		2,433
Thereafter		-		11,186		11,186
Total minimum lease payments	$	3,055	$	24,729	$	27,784

For the three months ended June 30, 2020 and 2021 (unaudited), rent expense was approximately $0.7 million. For the six months ended June 30, 2020 and 2021 (unaudited), rent expense was approximately $1.5 million and $1.4 million, respectively. It was included as part of other operating expenses on the Company’s consolidated statements of operations.

The Company was not a party to any material litigation, regulatory actions, or arbitration other than what is routinely encountered in claims activity and routine regulatory examinations, none of which is expected by the Company to have a materially adverse effect on the Company’s financial position or operations and/or cash flow as of December 31, 2020 and June 30, 2021 (unaudited).

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Stockholders’ Equity

6 Months Ended

Jun. 30, 2021

Stockholders' Equity Note [Abstract]

Stockholders’ Equity

11. Stockholders’ Equity

Common Stock

As of June 30, 2021, the Company had authorized a total of 640,000,000 shares for issuance as common stock. As of June 30, 2021, the Company had 126,727,134 shares of common stock issued and outstanding.

Preferred Stock

As of June 30, 2021, the Company had authorized a total of 10,000,000 shares for issuance as preferred stock. The Company’s board of directors has the authority to issue preferred stock and to determine the rights, privileges, preferences, restrictions, and voting rights of those shares. As of June 30, 2021, the Company had no shares of preferred stock outstanding.

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Public and Private Warrants

6 Months Ended

Jun. 30, 2021

Public and Private Warrants [Abstract]

Public and Private Warrants

12. Public and Private Warrants

As of June 30, 2021, the Company had 7,666,646 public warrants and 180,000 private placement warrants outstanding. Each whole warrant entitles the registered holder to purchase one share of common stock at a price of $11.50 per share, subject to adjustment, at any time commencing on September 8, 2021, which is the later of 30 days after the completion of the Business Combination or 12 months from INSU’s IPO closing date. The public warrants will expire on the fifth anniversary of the Business Combination, or earlier upon redemption or liquidation.

The Company may call the public warrants for redemption:

● in whole or in part;

● at a price of $0.01 per warrant;

● upon a minimum of 30 days’ prior written notice of redemption; and

● if, and only if, the last reported closing price of the ordinary shares equals of exceeds $18.00 per share for any 20 trading days within a 30-trading day period on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.

If the Company calls the public warrants for redemption, management will have the option to require all holders that wish to exercise the public warrants to do so on a “cashless basis,” as described in the warrant agreement.

The exercise price and number of shares of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a share dividend, recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of common stock at a price below its exercise price.

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Stock Option Plans

6 Months Ended

Jun. 30, 2021

Share-based Payment Arrangement [Abstract]

Stock Option Plans

13. Stock Option Plans

Restricted Stock Units (“RSUs”)

In 2021, we granted 4,985,044 restricted stock units (“RSUs”) under the 2021 Plan of which 1,252,929 RSUs were fully vested at the time of grant and vesting of 3,732,115 RSU grants is conditional based on continued employment or service for a specified period. Compensation cost related to RSU grants is recognized on a straight-line basis over the vesting period and is calculated using the closing price per share of our common stock on the grant date. For the three months and six months ended June 30, 2021, the Company recorded compensation expense of $7.8 million related to non performance based RSUs.

A summary of the Company’s RSUs as of June 30, 2021 (unaudited) is presented in the table below:

	Number of RSUs			Weighted-Average Fair Value
Balance at December 31, 2020		-		$	-
Granted		4,985,044			12.13
Vested		(1,684,348	)		10.78
Forfeited		-			-
Balance at June 30, 2020		3,300,696		$	12.82

As of June 30, 2021, there was $41.0 million of total unrecognized compensation cost related to RSUs. That cost is expected to be recognized over a weighted-average period of 2.81 years. The total grant date fair value of shares vested during the six months ended June 30, 2021 was $18.2 million.

Performance Based Awards

As of December 31, 2020, the Company had issued 150,000 outstanding performance-based awards (“PSUs”) to Dan Preston, Metromile’s Chief Executive Officer (“CEO”). As of the Closing, the performance-based provision was achieved for the outstanding performance-based awards as the Company completed a change in control event, and the Company recognized the expense related to these PSUs on the Closing date as there were no remaining vesting provisions. As a result, the Company recorded $2.5 million in stock-based compensation expense for the six months ended June 30, 2021.

In the six months ended June 30, 2021, the Company has issued 2,693,061 PSUs which each have a term of five years, subject to continuous services by each holder. One third of PSUs that vest are based on a specific number of policies in force achieved by the Company. One third of the PSUs that vest are based on the Company achieving positive operating cash flow for a period of at least one financial quarter. One third of the PSUs vest based on a market condition of the Company achieving a specific price per share for at least 20 days in a 30-day trading window. Once the performance targets are met, the PSUs that relate to the specific performance target vest immediately. As of June 30, 2021, the Company had recorded $1.0 million in expense from the PSUs related to the market condition. None of the performance conditions were probable of being satisfied as of June 30, 2021 and, therefore, there is no unrecognized stock compensation related to PSUs.

In the six months ended June 30, 2021, the Company granted separate tranches of PSU's subject to a Monte Carlo simulation. The following table provides a range of the assumptions for shares granted in 2021:

	2021
Expected volatility	65% - 70%
Expected term (years)	0.6 - 1.9
Expected dividend yield	n/a
Risk-free interest rate	0.3% - 0.6%

2011 Stock Plan

In 2011, the Company’s Board of Directors adopted the 2011 Equity Incentive Plan (the “2011 Plan”). The 2011 Plan provides for the granting of stock options to officers, directors, employees, and consultants of the Company. Options granted under the 2011 Plan may be Incentive Stock Options (“ISO”) or non-statutory Stock Options (“NSO”) as determined by the Board of Directors at the time of the option grant. The remaining unallocated shares reserved under the 2011 Plan were cancelled and no new awards will be granted under the 2011 Plan. Awards outstanding under the 2011 Plan were assumed by the Company upon the closing and continue to be governed by the terms of the 2011 Plan.

2021 Stock Plan

In connection with the Closing, the Company adopted the 2021 Equity Incentive Plan (the “2021 Plan”), under which 38,018,247 shares of common stock were initially reserved for issuance for ISOs. The 2021 Plan allows for the issuance of ISOs, NSOs, restricted stock awards, stock appreciation rights, restricted stock units (“RSUs”), and performance awards. The Board of Directors determines the period over which options become exercisable and options generally vest over a four-year period. The 2021 Plan became effective immediately following the closing.

The Company uses the Black-Scholes option pricing model to estimate the fair value of each option grant on the date of grant or modification. The Company amortizes the estimated fair value to stock compensation expense using the straight-line method over the vesting period of the option. The following is a description of the significant assumptions used in the option pricing model:

● Expected term — The expected term is the period of time when granted options are expected to be outstanding. In determining the expected term of options, the Company utilized the midpoint between the vesting date and contractual expiration date.

● Volatility — Because the Company’s stock has limited trading history, the Company calculates volatility by using the historical stock prices of comparable public companies.

● Risk-free interest rate — The Company bases the risk-free interest rate used in the Black-Scholes option valuation model on the rate of treasury securities with the same term as the options.

● Forfeiture rate — The weighted average forfeiture rate of unvested options.

● Expected dividends — The Company does not have plans to pay cash dividends in the future. Therefore, the Company uses an expected dividend yield of zero in the Black-Scholes option valuation model.

The following assumptions were used to estimate the value of options granted during the year ended December 31, 2020 and the six months ended June 30, 2021 (unaudited):

	Year ended December 31, 2020
Forfeiture rate	19.62% - 25.76	%
Volatility	47.00% - 62.00	%
Expected term (years)	4.95-7.00
Risk-free interest rate	0.26% - 1.73	%
Expected dividends	-

	Six months ended June 30, 2021
Forfeiture rate		26.2	%
Volatility		62.00	%
Expected term (years)		5.33
Risk-free interest rate		0.53	%
Expected dividends		-

Stock Option Activity

The following table summarizes the activity of the Company’s stock option plan:

						Weighted-
						Average
				Weighted-		Remaining		Aggregate
	Stock			Average		Contractual		Intrinsic
	Number of			Exercise		Term		Value
	Options			Price		(Years)		(in thousands)
Outstanding as of December 31, 2020		5,931,024		$	2.61		8.10	$	70,192
Options granted		4,231		$	14.45
Options exercised		(1,089,553	)	$	2.21
Options cancelled or expired and returned to plan		(1,808,157	)	$	2.17
Outstanding as of June 30, 2021		3,037,545		$	3.00		8.75	$	45,560
Vested and exercisable to vest as of June 30, 2021		423,342		$	2.96		8.50	$	6,367
Vested and expected as of June 30, 2021		2,034,446		$	2.99		8.62	$	30,533

The fair value of stock options granted are recognized as compensation expense in the consolidated statements of operations over the related vesting periods. The weighted-average grant date fair value per share of stock options granted during the six months ended June 30, 2021 (unaudited) was $7.69. As of June 30, 2021 (unaudited), there was approximately $2.6 million of unrecognized stock-based compensation cost related to stock options granted under the Plan, respectively, which is expected to be recognized over an average period of 2.47 years.

The following table illustrates stock-based compensation expense for employee and nonemployee RSUs and options for the six months ended June 30, 2020 and 2021 (unaudited) (in thousands).  

	Six Months Ended June 30,
	2020		2021
	(unaudited)
Cost of revenues	$	14	$	225
Research and development		236		630
Sales and marketing		3		139
Other operating expenses		302		11,027
Total stock-based compensation	$	555	$	12,021

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Income Taxes

6 Months Ended

Jun. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

14. Income Taxes

The consolidated effective tax rate for the six months ended June 30, 2020 and 2021 (unaudited), was 0% and 0%, respectively. The main driver of the difference between the federal statutory tax rate of 21% and the effective tax rate for both periods was primarily related to a full valuation allowance against the deferred tax assets.

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Segment and Geographic Information

6 Months Ended

Jun. 30, 2021

Segment Reporting [Abstract]

Segment and Geographic Information

15. Segment and Geographic Information

The Company operates in the following two reportable segments, which are the same as its operating segments:

- Insurance Services. Providing insurance policies for automobile owners

- Enterprise Business Solutions. Providing access to its developed technology under SaaS arrangements along with professional services to third party customers.

Operating segments are based upon the nature of the Company’s business and how its business is managed. The Company’s Chief Operating Decision Maker (“CODM”) is its CEO. The CODM uses the Company’s operating segment financial information to evaluate segment performance and to allocate resources. The CODM does not evaluate the performance of the Company’s assets on a segment basis for internal management reporting and, therefore, such information is not presented.

Contribution is used, in part, to evaluate the performance of, and allocate resources to, each of the segments. Segment contribution is segment revenue less the related costs of revenue and sales and marketing expenses. It excludes certain operating expenses that are not allocated to segments because they are separately managed at the consolidated corporate level. These unallocated costs include stock-based compensation expense, research and development expenses, and general and administrative expenses such as legal and accounting.

The total assets of the Insurance services and Enterprise business solutions segments are $119.8 million and $5.0 million, respectively as of June 30, 2021. The consolidated total assets of Operating segments are $124.8 million as of June 30, 2021.

The following table summarizes the operating results of the Company’s reportable segments (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2020		2021			2020			2021
	(unaudited)					(unaudited)
Revenue:
Insurance services	$	5,887	$	26,988		$	13,943		$	43,216
Enterprise business solutions		1,831		1,110			2,465			2,158
Total revenue	$	7,718	$	28,098		$	16,408		$	45,374
Contribution:
Insurance services	$	4,813	$	(1,173	)	$	6,501		$	(3,036	)
Enterprise business solutions		392		(865	)		(170	)		(1,597	)
Total contribution	$	5,205	$	(2,038	)	$	6,331		$	(4,633	)

The following table provides a reconciliation of the Company’s total reportable segments’ contribution to its total loss from operations (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2021			2020			2021
	(unaudited)						(unaudited)
Total segment contribution	$	5,205		$	(2,038	)	$	6,331		$	(4,633	)
Ceded premium, losses and LAE		4,064			(2,337	)		6,414			(5,242	)
Other income		470			180			798			1,327
Policy services expenses and other		813			1,692			1,799			2,063
Sales, marketing, and other acquisition costs		(424	)		25,716			3,388			72,883
Research and development		859			1,361			2,401			3,367
Amortization of capitalized software		2,799			2,701			5,496			5,352
Other operating expenses		3,965			16,729			9,216			25,311
Loss from operations	$	(7,341	)	$	(48,080	)	$	(23,181	)	$	(109,694	)

Geographical Breakdown of Direct Earned Premiums

Direct earned premium by state is as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2021		2020		2021
		(unaudited)				(unaudited)
California	$	13,015	$	16,334	$	27,606	$	31,480
Washington		2,611		3,379		5,324		6,364
New Jersey		2,046		2,749		4,243		5,208
Oregon		1,723		1,713		3,604		3,509
Illinois		1,054		1,019		2,202		2,060
Arizona		1,060		1,245		2,162		2,513
Pennsylvania		683		741		1,405		1,398
Virginia		398		578		825		1,048
Total premiums earned	$	22,590	$	27,758	$	47,371	$	53,580

During the three months ended June 30, 2020 and 2021 (unaudited), the Company recognized $1.8 million and $1.0 million of revenue earned from customers outside the United States, respectively. During the six months ended June 30, 2020 and 2021 (unaudited), the Company recognized $2.5 million and $2.0 million of revenue earned from customers outside the United States, respectively. Long-lived assets are all held in the U.S. For the three and six months ended June 30, 2020 and 2021 (unaudited), substantially all of the Company’s revenue was earned from customers residing in the United States.

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Net Loss per Share

6 Months Ended

Jun. 30, 2021

Earnings Per Share [Abstract]

Net Loss per Share

16. Net Loss per Share

Net loss per share calculations and potentially dilutive security amounts for all periods prior to the Merger have been retrospectively adjusted to the equivalent number of shares outstanding immediately after the Merger to effect the reverse recapitalization. Historically, reported weighted average shares outstanding have been multiplied by 1.01547844, which is the share exchange ratio established by the Merger Agreement.

The following table sets forth the computation of basic and diluted net loss per share attributable to our common stockholders:

	Three months ended June 30,						Six months ended June 30,
	2020			2021			2020			2021
Numerator:	(unaudited)						(unaudited)
Net loss attributable to common stockholders ($ in thousands)	$	(8,898	)	$	(41,260	)	$	(25,787	)	$	(144,887	)
Demoninator:
Weighted average common shares outstanding - basic and diluted		8,886,421			126,693,218			8,878,928			101,236,461
Net loss per share attributable to common stockholders - basic and diluted	$	(1.00	)	$	(0.33	)	$	(2.90	)	$	(1.43	)

As we have reported net loss for each of the periods presented, all potentially dilutive securities are antidilutive. The following potential outstanding shares of Common Stock were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been antidilutive:

	As of June 30,
	2020		2021
	(unaudited)
Convertible preferred stock		68,776,614		-
Outstanding stock options - Stock Plan		4,344,819		3,037,545
Warrants for preferred stock		869,942		-
Warrants for common stock		78,371		7,846,667
Restricted stock units		-		7,678,105
Total anti-dilutive securities		74,069,746		18,562,317

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Related-Party Transactions

6 Months Ended

Jun. 30, 2021

Related Party Transactions [Abstract]

Related-Party Transactions

17. Related-Party Transactions

In August 2014, the Company loaned the CEO $0.4 million with interest at 3.09% and adjusted to 1.5% in April 2020, which was used to early exercise stock options issued to the CEO and was due at the earlier of one year after termination of employment, upon an Initial Public Offering or change in control, or ten years from the date issued. The loan was full recourse, and also collateralized by the underlying shares of common stock. For accounting under GAAP, the note receivable is presented as contra-equity in the accompanying consolidated balance sheets. This loan was paid in full in February 2021 and is no longer outstanding.

In March 2018, the Company entered into an agreement with a third party under which the Company developed proprietary software solutions and provides access to and use of such software solutions and related services. In July 2018, the third party became an investor of the Company as part of the Series E convertible preferred stock Financing. During the three months ended June 30, 2020 and June 30, 2021 (unaudited), the Company recognized $1.8 million and 1.0 million of revenue from the investor, respectively. During the six months ended June 30, 2020 and June 30, 2021 (unaudited), the Company recognized $2.5 million and $2.0 million of revenue from the investor, respectively. The Company had $0 million and $0.2 million in accounts receivable balances from the investor as of December 31, 2020 and June 30, 2021 (unaudited) respectively. The Company continues to enter into contracts with the investor related to the Company’s Enterprise business solutions (see Note 14, Segment and Geographic Information).

An executive of Hudson, who the Company entered into a Note Purchase and Security Agreement with in 2020 (see Note 9, Notes Payable, net), is on the Company’s Board of Directors. This loan was repaid in March 2021 and is no longer outstanding.

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Accounting Policies, by Policy (Policies)

6 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying interim unaudited consolidated financial statements have been prepared in accordance GAAP and in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). References to the Accounting Standard Codification (“ASC”) and Accounting Standard Updates (“ASU”) included hereinafter refer to the Accounting Standards Codification and Updates established by the Financial Accounting Standards Board (“FASB”) as the source of authoritative GAAP. The consolidated financial statements include the accounts of Metromile, Inc. and its subsidiaries, all of which are wholly owned. All intercompany accounts and transactions have been eliminated in consolidation.

These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2020, which are included in the Company’s Post-Effective Amendment No. 1 to Form S-1 filed with the SEC on August 9, 2021. 

Liquidity and Capital Resources

Liquidity and Capital Resources

The Company’s consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has had recurring losses and an accumulated deficit since its inception, related primarily to the development of its website, technology, customer acquisition, insurance losses and other operations. The Company obtained additional funding of $310 million in 2021 in connection with the Business Combination to support its ongoing operations and fund future growth of the Company. Management has concluded that substantial doubt regarding the Company’s ability to continue as a going concern for the period August 2021 through September 2022 has been alleviated based upon the recent funding and future operational improvement plans. 

In the first quarter of 2020, the global pandemic caused by COVID-19 breached the U.S. and resulted in Shelter-In-Place orders across the country and insurance department bulletins limiting the actions that insurance carriers may take and reducing the amount of premiums that will be promptly received in the short term. These factors resulted in a significant decline in both revenues and losses of the Insurance Company. In addition, in response to these events, the Company performed a temporary reduction in force of 125 employees to further align costs with revenue during the second quarter of 2020. The Company will continue to monitor the situation closely, but given the uncertainty about the duration or magnitude of the pandemic, management cannot estimate the impact on its financial condition, operations, and workforce.

Unaudited interim financial information

Unaudited interim financial information

The accompanying interim consolidated balance sheet as of June 30, 2021, the interim consolidated statements of operations, comprehensive loss, convertible preferred stock and stockholders’ (deficit) equity for the three months and six months ended June 30, 2020 and 2021, and cash flows for the six months ended June 30, 2020 and 2021 are unaudited. These unaudited interim consolidated financial statements are presented in accordance with the rules and regulations of the SEC and do not include all disclosures normally required in annual consolidated financial statements prepared in accordance with GAAP. In management’s opinion, the unaudited interim consolidated financial statements have been prepared on the same basis as the annual financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of June 30, 2021 and the Company’s consolidated results of operations for the three months and six months ended June 30, 2020 and 2021, and cash flows for the six months ended June 30, 2020 and 2021. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full fiscal year or any other future interim or annual periods.

Use of Estimates

Use of Estimates

The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. The Company’s principal estimates include unpaid losses and LAE reserves; the fair value of investments; the fair value of stock-based awards; the fair value of the warrant liability; premium refunds to policyholders; reinsurance recoverable on unpaid loss; and the valuation allowance for income taxes. Because of uncertainties associated with estimating the amounts, timing and likelihood of possible outcomes, actual results could differ materially from these estimates.

There have been no material changes to our significant accounting policies from our audited consolidated financial statements included in the Company’s Post-Effective Amendment No. 1 to Form S-1 filed with the SEC on August 9, 2021. 

Digital Assets, Net

Digital Assets, Net

During the six months ended June 30, 2021, the Company purchased an aggregate of $1.0 million in digital assets, comprised solely of bitcoin. The Company currently accounts for these digital assets as indefinite-lived intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other. The Company has ownership of and control over the purchased bitcoin asset and uses third-party custodial services to secure it. The digital assets are initially recorded at cost and are subsequently remeasured on the consolidated balance sheets at cost, net of any impairment losses incurred since acquisition.

An impairment analysis is performed at each reporting period to identify whether events or changes in circumstances, in particular decreases in the quoted prices on active exchanges, indicate that it is more likely than not that digital assets held by the Company are impaired. The fair value of digital assets is determined on a nonrecurring basis in accordance with ASC 820, Fair Value Measurement, based on quoted prices on the active exchange(s) that the Company has determined is its principal market for bitcoin (Level 1 inputs). If the carrying value of the digital asset exceeds the fair value based on the lowest price quoted in the active exchanges during the period, an impairment loss has occurred with respect to those digital assets in the amount equal to the difference between their carrying values and the price determined.

Impairment losses are recognized within Other expense in the consolidated statements of operations in the period in which the impairment is identified. The impaired digital assets are written down to their fair value at the time of impairment and this new cost basis will not be adjusted upward for any subsequent increase in fair value. Gains are not recorded until realized upon sale. There were no digital assets sales during the six months ended June 30, 2021.

Recent Issued Accounting Pronouncements

Recent Issued Accounting Pronouncements

As an emerging growth company (“EGC”), the Jumpstart Our Business Startups Act (the “JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act until such time as the Company is no longer considered to be an EGC. The adoption dates discussed below reflect this election.

In February 2016, FASB issued ASU 2016-02, Leases (Topic 842). Lessees will need to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability. For income statement purposes, FASB retained a dual model, requiring leases to be classified as either operating or finance. Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines. Lessor accounting is similar to the current model but updated to align with certain changes to the lessee model and the new revenue recognition standard. The standard will be effective beginning after December 15, 2021. Early adoption is permitted. The Company is currently evaluating this new standard and the impact it will have on its consolidated financial statements.

In June 2016, FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), intended to improve the timing, and enhance the accounting and disclosure, of credit losses on financial assets. This update modified the existing accounting guidance related to the impairment evaluation for available-for-sale debt securities, reinsurance recoverables, and premiums receivables and could result in the creation of an allowance for credit losses as a contra asset account. The ASU requires a cumulative-effect change to retained earnings in the period of adoption and prospective changes on previously recorded impairments, to the extent applicable. The amendments in ASU 2016-13 are effective for fiscal years beginning after December 15, 2022. The Company is currently evaluating this new standard and believes that it will not have a material impact on the Company’s consolidated financial statements with its current investment portfolio.

In March 2020, FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions to contract modifications and hedging relationships that reference LIBOR or another reference rate expected to be discontinued. The standard is effective upon issuance through December 31, 2022 and may be applied at the beginning of the interim period that includes March 12, 2020 or any date thereafter. The Company is currently evaluating this new standard and the impact it will have on its consolidated financial statements.

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Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2021

Fair Value Disclosures [Abstract]

Schedule of assets measured on a recurring basis at fair value

	Fair Value Measurement at December 31, 2020
	Level 1		Level 2		Level 3		Total
Cash equivalents
Money market accounts	$	6,771	$	-	$	-	$	6,771
Total cash equivalents		6,771		-		-		6,771
Restricted cash equivalents
Money market accounts		6,201		-		-		6,201
Certificates of deposits		3,331		-		-		3,331
Total restricted cash equivalents		9,532		-		-		9,532
Marketable securities - restricted
Corporate debt securities		-		5,955		-		5,955
U.S. treasury securities		6,994		-		-		6,994
Commercial paper		-		8,791		-		8,791
Asset backed securities		-		2,911		-		2,911
Total marketable securities - restricted	$	6,994	$	17,657	$	-	$	24,651

	Fair Value Measurement at June 30, 2021 (unaudited)
	Level 1		Level 2		Level 3		Total
Cash equivalents
Money market accounts	$	196,296	$	-	$	-	$	196,296
Total cash equivalents		196,296		-		-		196,296
Restricted cash equivalents
Money market accounts		23,962		-		-		23,962
Certificates of deposits		3,331		-		-		3,331
Total restricted cash equivalents		27,293		-		-		27,293
Marketable securities - restricted
Corporate debt securities		-		4,473		-		4,473
U.S. treasury and agency securities		20,313		1,995		-		22,308
Commercial paper		-		14,681		-		14,681
Asset backed securities		-		5,175		-		5,175
Total marketable securities - restricted	$	20,313	$	26,324	$	-	$	46,637

Schedule of warrant liability

Balance at December 31, 2019	$	1,738
Issuance of warrant on Series E convertible preferred stock		12,620
Increase in fair value of warrant		69,294
Balance at December 31, 2020	$	83,652
Increase in fair value of warrants		47,062
Exercise of preferred stock warrants prior to Business Combination		(130,714	)
Public and Private placement Warrants acquired in Business Combination		45,623
Decrease in fair value of Public and Private placement Warrants		(27,909	)
Balance at June 30, 2021	$	17,714

Schedule of Black-Scholes option valuation model

	Estimated
	Fair Value of
	Warrants
	as of										Risk-Free			Expected
	June 30,		Exercise		Dividend						Interest			Term
	2021		Price		Yield			Volatility			Rate			(in Years)
Private placement warrants	$	770	$	11.50		0	%		65.00	%		0.79	%		4.6

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Marketable Securities (Tables)

6 Months Ended

Jun. 30, 2021

Marketable Securities Disclosure [Abstract]

Schedule of available-for-sale securities

	As of December 31, 2020
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gain		Loss		Fair Value
Marketable securities - restricted
Corporate debt securities	$	5,938	$	17	$	-	$	5,955
U.S. treasury securities		6,994		-		-		6,994
Commercial paper		8,791		-		-		8,791
Asset backed securities		2,911		-		-		2,911
Total marketable securities - restricted	$	24,634	$	17	$	-	$	24,651

	As of June 30, 2021 (unaudited)
	Amortized		Unrealized		Unrealized			Estimated
	Cost		Gain		Loss			Fair Value
Marketable securities - restricted
Corporate debt securities	$	4,473	$	-	$	-		$	4,473
U.S. treasury  and agency securities		22,319		-		(11	)		22,308
Commercial paper		14,681		-		-			14,681
Asset backed securities		5,175		-		-			5,175
Total marketable securities - restricted	$	46,648	$	-	$	(11	)	$	46,637

Schedule of amortized cost and estimated fair value of marketable securities

	As of December 31, 2020
	Amortized		Estimated
	Cost		Fair Value
Due within one year	$	21,603	$	21,629
Due between one to five years		3,031		3,022
	$	24,634	$	24,651

	As of June 30, 2021 (unaudited)
	Amortized		Estimated
	Cost		Fair Value
Due within one year	$	45,898	$	45,893
Due between one to five years		750		744
	$	46,648	$	46,637

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Business Combination (Tables)

6 Months Ended

Jun. 30, 2021

Business Combinations [Abstract]

Schedule of business combination proceeds

	Recapitalization
Cash – INSU’s trust and cash (net of redemptions)	$	229,925
Cash – PIPE		170,000
Less transaction costs and advisory fees paid		31,456
Less cash payments to Metromile Operating Company stockholders		32,000
Net Business Combination and PIPE financing		336,469
Less non-cash net liabilities assumed from INSU		45,516
Net contributions from Business Combination and PIPE Financing	$	290,953

Schedule of equity changes due to business combination

	Number of Shares
INSU Class A Common stock, outstanding prior to Business Combination		23,540,000
INSU Class B Common stock, outstanding prior to Business Combination		6,669,667
Less redemption of INSU shares		8,372
Common stock of INSU		30,201,295
Shares issued in PIPE		17,000,000
Business Combination and PIPE financing shares		47,201,295
Metromile Operating Company shares (1)		79,525,839
Total shares of common stock immediately after Business Combination		126,727,134

(1) The number of Metromile Operating Company shares was determined from the 78,313,665 shares of Metromile Operating Company common and preferred stock outstanding immediately prior to the closing of the Business Combination, which are presented net of the common and preferred stock redeemed, converted at the Exchange Ratio of 1.01547844. All fractional shares were rounded down.

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Deferred Policy Acquisition Costs, Net (Tables)

6 Months Ended

Jun. 30, 2021

Deferred Policy Acquisition Costs Disclosures [Abstract]

Schedule of deferred policy acquisition costs

	December 31,			June 30,
	2020			2021
				(unaudited)
Deferred policy acquisition costs	$	10,511		$	11,069
Less deferred ceding commission		(1,202	)		(95	)
Less accumulated amortization		(8,653	)		(9,359	)
Deferred policy acquisition costs, net	$	656		$	1,615

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Loss and Loss Adjustment Expense Reserves (Tables)

6 Months Ended

Jun. 30, 2021

Insurance [Abstract]

Schedule of beginning and ending reserve balances for losses and LAE, net of reinsurance recoverable

	Six Months Ended June 30,
	2020			2021
	(unaudited)
Balance at January 1	$	52,222		$	57,093
Less reinsurance recoverable		(28,837	)		(33,941	)
Net balance at January 1		23,385			23,152
Incurred related to:
Current year		6,928			33,727
Prior years		738			1,108
Total incurred		7,666			34,835
Paid related to:
Current year		2,324			9,760
Prior years		8,534			(17,249	)
Total paid		10,858			(7,489	)
Net balance at end of period		20,193			65,476
Plus reinsurance recoverable		30,250			-
Balance at end of period	$	50,443		$	65,476

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Reinsurance (Tables)

6 Months Ended

Jun. 30, 2021

Reinsurance Disclosures [Abstract]

Schedule of effects of reinsurance

	December 31, 2020
	Premium			Premium			Unearned			Losses and LAE			Loss and LAE
	Written			Earned			Premium			Incurred			Reserves
Direct	$	100,611		$	99,712		$	16,070		$	74,943		$	57,093
Ceded		(85,504	)		(84,740	)		(13,668	)		(54,010	)		(33,941	)
Net	$	15,107		$	14,972		$	2,402		$	20,933		$	23,152

	June 30, 2021 (unaudited)
	Premium			Premium			Unearned		Losses and LAE			Loss and LAE
	Written			Earned			Premium		Incurred			Reserves
Direct	$	54,330		$	53,580		$	16,820	$	49,536		$	65,476
Ceded		(19,411	)		(33,080	)		-		(14,701	)		-
Net	$	34,919		$	20,500		$	16,820	$	34,835		$	65,476

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Notes Payable, net (Tables)

6 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

Schedule of debt outstanding, net

	December 31,			June 30,
	2020			2021
				(unaudited)
2019 Loan and Security Agreement	$	25,000		$	-
Subordinated Note Purchase and Security Agreement		32,461			-
Paycheck Protection Program Loan		5,880			-
Principal Amount Due		63,341			-
Less: Unamortized debt issuance costs and discounts		(11,407	)		-
Notes payable, net	$	51,934		$	-

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Commitments (Tables)

6 Months Ended

Jun. 30, 2021

Commitments and Contingencies Disclosure [Abstract]

Schedule of future minimum lease payments

As of June 30, 2021 (unaudited)	Purchase Obligations		Leases		Total
2021 (remaining six months)	$	3,055	$	1,646	$	4,701
2022		-		3,093		3,093
2023		-		3,181		3,181
2024		-		3,190		3,190
2025		-		2,433		2,433
Thereafter		-		11,186		11,186
Total minimum lease payments	$	3,055	$	24,729	$	27,784

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Stock Option Plans (Tables)

6 Months Ended

Jun. 30, 2021

Stock Option Plans (Tables) [Line Items]

Schedule of restricted stock units

	Number of RSUs			Weighted-Average Fair Value
Balance at December 31, 2020		-		$	-
Granted		4,985,044			12.13
Vested		(1,684,348	)		10.78
Forfeited		-			-
Balance at June 30, 2020		3,300,696		$	12.82

Schedule of estimate the value of options granted

	Year ended December 31, 2020
Forfeiture rate	19.62% - 25.76	%
Volatility	47.00% - 62.00	%
Expected term (years)	4.95-7.00
Risk-free interest rate	0.26% - 1.73	%
Expected dividends	-

	Six months ended June 30, 2021
Forfeiture rate		26.2	%
Volatility		62.00	%
Expected term (years)		5.33
Risk-free interest rate		0.53	%
Expected dividends		-

Schedule of activity of stock option plan

						Weighted-
						Average
				Weighted-		Remaining		Aggregate
	Stock			Average		Contractual		Intrinsic
	Number of			Exercise		Term		Value
	Options			Price		(Years)		(in thousands)
Outstanding as of December 31, 2020		5,931,024		$	2.61		8.10	$	70,192
Options granted		4,231		$	14.45
Options exercised		(1,089,553	)	$	2.21
Options cancelled or expired and returned to plan		(1,808,157	)	$	2.17
Outstanding as of June 30, 2021		3,037,545		$	3.00		8.75	$	45,560
Vested and exercisable to vest as of June 30, 2021		423,342		$	2.96		8.50	$	6,367
Vested and expected as of June 30, 2021		2,034,446		$	2.99		8.62	$	30,533

Schedule of stock-based compensation expense for employee and nonemployee options

	Six Months Ended June 30,
	2020		2021
	(unaudited)
Cost of revenues	$	14	$	225
Research and development		236		630
Sales and marketing		3		139
Other operating expenses		302		11,027
Total stock-based compensation	$	555	$	12,021

Performance Based Awards [Member]

Stock Option Plans (Tables) [Line Items]

Schedule of estimate the value of options granted

	2021
Expected volatility	65% - 70%
Expected term (years)	0.6 - 1.9
Expected dividend yield	n/a
Risk-free interest rate	0.3% - 0.6%

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Segment and Geographic Information (Tables)

6 Months Ended

Jun. 30, 2021

Segment Reporting [Abstract]

Schedule of operating results of the Company’s reportable segments

	Three Months Ended June 30,					Six Months Ended June 30,
	2020		2021			2020			2021
	(unaudited)					(unaudited)
Revenue:
Insurance services	$	5,887	$	26,988		$	13,943		$	43,216
Enterprise business solutions		1,831		1,110			2,465			2,158
Total revenue	$	7,718	$	28,098		$	16,408		$	45,374
Contribution:
Insurance services	$	4,813	$	(1,173	)	$	6,501		$	(3,036	)
Enterprise business solutions		392		(865	)		(170	)		(1,597	)
Total contribution	$	5,205	$	(2,038	)	$	6,331		$	(4,633	)

Schedule of contribution to its total loss from operations

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2021			2020			2021
	(unaudited)						(unaudited)
Total segment contribution	$	5,205		$	(2,038	)	$	6,331		$	(4,633	)
Ceded premium, losses and LAE		4,064			(2,337	)		6,414			(5,242	)
Other income		470			180			798			1,327
Policy services expenses and other		813			1,692			1,799			2,063
Sales, marketing, and other acquisition costs		(424	)		25,716			3,388			72,883
Research and development		859			1,361			2,401			3,367
Amortization of capitalized software		2,799			2,701			5,496			5,352
Other operating expenses		3,965			16,729			9,216			25,311
Loss from operations	$	(7,341	)	$	(48,080	)	$	(23,181	)	$	(109,694	)

Shedule of geographical breakdown of direct earned premiums

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2021		2020		2021
		(unaudited)				(unaudited)
California	$	13,015	$	16,334	$	27,606	$	31,480
Washington		2,611		3,379		5,324		6,364
New Jersey		2,046		2,749		4,243		5,208
Oregon		1,723		1,713		3,604		3,509
Illinois		1,054		1,019		2,202		2,060
Arizona		1,060		1,245		2,162		2,513
Pennsylvania		683		741		1,405		1,398
Virginia		398		578		825		1,048
Total premiums earned	$	22,590	$	27,758	$	47,371	$	53,580

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Net Loss per Share (Tables)

6 Months Ended

Jun. 30, 2021

Earnings Per Share [Abstract]

Schedule of basic and diluted net loss per share

	Three months ended June 30,						Six months ended June 30,
	2020			2021			2020			2021
Numerator:	(unaudited)						(unaudited)
Net loss attributable to common stockholders ($ in thousands)	$	(8,898	)	$	(41,260	)	$	(25,787	)	$	(144,887	)
Demoninator:
Weighted average common shares outstanding - basic and diluted		8,886,421			126,693,218			8,878,928			101,236,461
Net loss per share attributable to common stockholders - basic and diluted	$	(1.00	)	$	(0.33	)	$	(2.90	)	$	(1.43	)

schedule of antidilutive securities excluded from computation of earnings per share

	As of June 30,
	2020		2021
	(unaudited)
Convertible preferred stock		68,776,614		-
Outstanding stock options - Stock Plan		4,344,819		3,037,545
Warrants for preferred stock		869,942		-
Warrants for common stock		78,371		7,846,667
Restricted stock units		-		7,678,105
Total anti-dilutive securities		74,069,746		18,562,317

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Overview and Basis of Presentation (Details) - USD ($) $ / shares in Units, $ in Thousands			6 Months Ended
	Feb. 09, 2021	Sep. 08, 2020	Jun. 30, 2021	Dec. 31, 2020
Business Description And Accounting Policies [Line Items]
common stock, par value (in Dollars per share)			$ 0.0001
Purchase price (in Dollars per share)	$ 10.00
Other offering costs		$ 14,200	$ 31,456
Underwriting fees		4,000
Deferred underwriting fees		$ 9,800
Description of sale of stock		Following the closing of the IPO on September 8, 2020, $230.0 million ($10.00 per Unit) from the net proceeds of the sale of the Units in the IPO and the sale of the Placement Units was placed in a trust account (the “Trust Account”), which was invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less, or in money market funds meeting certain conditions under Rule 2a-7 of the Investment Company Act, as determined by INSU.
Sale of stock (in Shares)	17,000,000
Aggregate purchase price	$ 170,000
Loss and LAE reserves			65,500	$ 57,100
Additional fund in 2021			310,000
Aggregate of digital assets			$ 1,000
IPO [Member]
Business Description And Accounting Policies [Line Items]
Sale of stock (in Shares)		23,000,000
Other offering costs		$ 400
Over-Allotment Option [Member]
Business Description And Accounting Policies [Line Items]
Sale of stock (in Shares)		3,000,000
Purchase price (in Dollars per share)		$ 10.00
Gross proceeds		$ 230,000
Private Placement [Member]
Business Description And Accounting Policies [Line Items]
Sale of stock (in Shares)		540,000
Sale per unit (in Dollars per share)		$ 10.00
Gross proceeds from private placement		$ 5,400
Common Class A [Member]
Business Description And Accounting Policies [Line Items]
common stock, par value (in Dollars per share)		$ 0.0001
Class B Common Stock [Member]
Business Description And Accounting Policies [Line Items]
Share price (in Dollars per share)			$ 0.0001

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Fair Value of Financial Instruments (Details) - Schedule of assets measured on a recurring basis at fair value - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Cash equivalents
Total cash equivalents	$ 196,296	$ 6,771
Restricted cash equivalents
Total restricted cash equivalents	27,293	9,532
Marketable securities - restricted
Total marketable securities - restricted	46,637	24,651
Money market accounts [Member]
Cash equivalents
Total cash equivalents	196,296	6,771
Restricted cash equivalents
Total restricted cash equivalents	23,962	6,201
Certificates of Deposit [Member]
Restricted cash equivalents
Total restricted cash equivalents	3,331	3,331
Corporate Debt Securities [Member]
Marketable securities - restricted
Total marketable securities - restricted	4,473	5,955
US Treasury Securities [Member]
Marketable securities - restricted
Total marketable securities - restricted	22,308	6,994
Commercial Paper [Member]
Marketable securities - restricted
Total marketable securities - restricted	14,681	8,791
Asset-backed Securities [Member]
Marketable securities - restricted
Total marketable securities - restricted	5,175	2,911
Level 1 [Member]
Cash equivalents
Total cash equivalents	196,296	6,771
Restricted cash equivalents
Total restricted cash equivalents	27,293	9,532
Marketable securities - restricted
Total marketable securities - restricted	20,313	6,994
Level 1 [Member] | Money market accounts [Member]
Cash equivalents
Total cash equivalents	196,296	6,771
Restricted cash equivalents
Total restricted cash equivalents	23,962	6,201
Level 1 [Member] | Certificates of Deposit [Member]
Restricted cash equivalents
Total restricted cash equivalents	3,331	3,331
Level 1 [Member] | Corporate Debt Securities [Member]
Marketable securities - restricted
Total marketable securities - restricted
Level 1 [Member] | US Treasury Securities [Member]
Marketable securities - restricted
Total marketable securities - restricted	20,313	6,994
Level 1 [Member] | Commercial Paper [Member]
Marketable securities - restricted
Total marketable securities - restricted
Level 1 [Member] | Asset-backed Securities [Member]
Marketable securities - restricted
Total marketable securities - restricted
Level 2 [Member]
Cash equivalents
Total cash equivalents
Restricted cash equivalents
Total restricted cash equivalents
Marketable securities - restricted
Total marketable securities - restricted	26,324	17,657
Level 2 [Member] | Money market accounts [Member]
Cash equivalents
Total cash equivalents
Restricted cash equivalents
Total restricted cash equivalents
Level 2 [Member] | Certificates of Deposit [Member]
Restricted cash equivalents
Total restricted cash equivalents
Level 2 [Member] | Corporate Debt Securities [Member]
Marketable securities - restricted
Total marketable securities - restricted	4,473	5,955
Level 2 [Member] | US Treasury Securities [Member]
Marketable securities - restricted
Total marketable securities - restricted	1,995
Level 2 [Member] | Commercial Paper [Member]
Marketable securities - restricted
Total marketable securities - restricted	14,681	8,791
Level 2 [Member] | Asset-backed Securities [Member]
Marketable securities - restricted
Total marketable securities - restricted	5,175	2,911
Level 3 [Member]
Cash equivalents
Total cash equivalents
Restricted cash equivalents
Total restricted cash equivalents
Marketable securities - restricted
Total marketable securities - restricted
Level 3 [Member] | Money market accounts [Member]
Cash equivalents
Total cash equivalents
Restricted cash equivalents
Total restricted cash equivalents
Level 3 [Member] | Certificates of Deposit [Member]
Restricted cash equivalents
Total restricted cash equivalents
Level 3 [Member] | Corporate Debt Securities [Member]
Marketable securities - restricted
Total marketable securities - restricted
Level 3 [Member] | US Treasury Securities [Member]
Marketable securities - restricted
Total marketable securities - restricted
Level 3 [Member] | Commercial Paper [Member]
Marketable securities - restricted
Total marketable securities - restricted
Level 3 [Member] | Asset-backed Securities [Member]
Marketable securities - restricted
Total marketable securities - restricted

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Fair Value of Financial Instruments (Details) - Schedule of warrant liability - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2021	Dec. 31, 2020
Schedule of warrant liability [Abstract]
Balance, beginning of period	$ 83,652	$ 1,738
Issuance of warrant on Series E convertible preferred stock		12,620
Increase in fair value of warrants	47,062	69,294
Exercise of preferred stock warrants prior to Business Combination	(130,714)
Public and Private placement Warrants acquired in Business Combination	45,623
Decrease in fair value of Public and Private placement Warrants	(27,909)
Balance, Ending of period	$ 17,714	$ 83,652

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Fair Value of Financial Instruments (Details) - Schedule of Black-Scholes option valuation model $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2021 USD ($) $ / shares
Schedule of Black-Scholes option valuation model [Abstract]
Estimated Fair Value of Warrants (in Dollars) | $	$ 770
Exercise Price (in Dollars per share) | $ / shares	$ 11.50
Dividend Yield	0.00%
Volatility	65.00%
Risk-Free Interest Rate	0.79%
Expected Term (in Years)	4 years 7 months 6 days

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Marketable Securities (Details) - USD ($) $ in Millions	6 Months Ended	12 Months Ended
	Jun. 30, 2021	Dec. 31, 2020
Marketable Securities Disclosure [Abstract]
Marketable securities bonds with carrying values	$ 5.2	$ 4.9

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Marketable Securities (Details) - Schedule of available-for-sale securities - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Marketable securities - restricted
Amortized Cost	$ 46,648	$ 24,634
Unrealized Gain		17
Unrealized Loss	(11)
Estimated Fair Value	46,637	24,651
Corporate Debt Securities [Member]
Marketable securities - restricted
Amortized Cost	4,473	5,938
Unrealized Gain		17
Unrealized Loss
Estimated Fair Value	4,473	5,955
U.S. Treasury Securities [Member]
Marketable securities - restricted
Amortized Cost	22,319	6,994
Unrealized Gain
Unrealized Loss	(11)
Estimated Fair Value	22,308	6,994
Commercial Paper [Member]
Marketable securities - restricted
Amortized Cost	14,681	8,791
Unrealized Gain
Unrealized Loss
Estimated Fair Value	14,681	8,791
Asset-backed Securities [Member]
Marketable securities - restricted
Amortized Cost	5,175	2,911
Unrealized Gain
Unrealized Loss
Estimated Fair Value	$ 5,175	$ 2,911

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Marketable Securities (Details) - Schedule of amortized cost and estimated fair value of marketable securities - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Amortized Cost [Member]
Marketable Securities (Details) - Schedule of amortized cost and estimated fair value of marketable securities [Line Items]
Due within one year	$ 45,898	$ 21,603
Due between one to five years	750	3,031
Total	46,648	24,634
Estimated Fair value [Member]
Marketable Securities (Details) - Schedule of amortized cost and estimated fair value of marketable securities [Line Items]
Due within one year	45,893	21,629
Due between one to five years	744	3,022
Total	$ 46,637	$ 24,651

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Business Combination (Details)	6 Months Ended
	Jun. 30, 2021 shares
Business Combinations [Abstract]
Common and preferred stock outstanding	78,313,665
Business combination converted exchange ratio	1.01547844

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Business Combination (Details) - Schedule of business combination proceeds - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Sep. 08, 2020
Schedule of business combination proceeds [Abstract]
Cash – INSU’s trust and cash (net of redemptions)	$ 229,925
Cash – PIPE	170,000
Less transaction costs and advisory fees paid	31,456	$ 14,200
Less cash payments to Metromile Operating Company stockholders	32,000
Net Business Combination and PIPE financing	336,469
Less non-cash net liabilities assumed from INSU	45,516
Net contributions from Business Combination and PIPE Financing	$ 290,953

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Business Combination (Details) - Schedule of equity changes due to business combination	6 Months Ended
	Jun. 30, 2021 shares
Schedule of equity changes due to business combination [Abstract]
INSU Class A Common stock, outstanding prior to Business Combination	23,540,000
INSU Class B Common stock, outstanding prior to Business Combination	6,669,667
Less redemption of INSU shares	8,372
Common stock of INSU	30,201,295
Shares issued in PIPE	17,000,000
Business Combination and PIPE financing shares	47,201,295
Metromile Operating Company shares	79,525,839	[1]
Total shares of common stock immediately after Business Combination	126,727,134

[1] The number of Metromile Operating Company shares was determined from the 78,313,665 shares of Metromile Operating Company common and preferred stock outstanding immediately prior to the closing of the Business Combination, which are presented net of the common and preferred stock redeemed, converted at the Exchange Ratio of 1.01547844. All fractional shares were rounded down.

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Deferred Policy Acquisition Costs, Net (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Deferred Policy Acquisition Costs Disclosures [Abstract]
Total amortization expense	$ 0.3	$ 0.4	$ 0.7	$ 0.8

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Deferred Policy Acquisition Costs, Net (Details) - Schedule of deferred policy acquisition costs - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2021	Dec. 31, 2020
Schedule of deferred policy acquisition costs [Abstract]
Deferred policy acquisition costs	$ 11,069	$ 10,511
Less deferred ceding commission	(95)	(1,202)
Less accumulated amortization	(9,359)	(8,653)
Deferred policy acquisition costs, net	$ 1,615	$ 656

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Digital Assets, Net (Details) $ in Millions	1 Months Ended	3 Months Ended	6 Months Ended
	Jun. 30, 2021 USD ($)	Jun. 30, 2021 USD ($)	Jun. 30, 2021 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
Purchased bitcoin			$ 1.0
Bitcoin losses		$ 0.1	0.1
Carrying value digital assets held	$ 0.9
Impairment losses	0.1
Fair market value	$ 0.9	$ 0.9	$ 0.9

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Loss and Loss Adjustment Expense Reserves (Details) - Schedule of beginning and ending reserve balances for losses and LAE, net of reinsurance recoverable - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Schedule of beginning and ending reserve balances for losses and LAE, net of reinsurance recoverable [Abstract]
Balance at January 1	$ 57,093	$ 52,222
Less reinsurance recoverable	(33,941)	(28,837)
Net balance at January 1	23,152	23,385
Incurred related to:
Current year	33,727	6,928
Prior years	1,108	738
Total incurred	34,835	7,666
Paid related to:
Current year	9,760	2,324
Prior years	(17,249)	8,534
Total paid	(7,489)	10,858
Net balance at end of period	65,476	20,193
Plus reinsurance recoverable		30,250
Balance at end of period	$ 65,476	$ 50,443

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Reinsurance (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Jul. 31, 2021	May 01, 2020	May 01, 2019	May 01, 2018	May 01, 2017
Reinsurance (Details) [Line Items]
Paid net			$ 9.0
Reinsurance ceding rate						85.00%	85.00%	85.00%	85.00%
Reinsurance agreement description			In addition, under the reinsurance agreements effective May 1, 2017 and May 1, 2018, LAE was ceded at a fixed rate of 3% of ceded earned premium. Under the reinsurance agreement effective May 1, 2019, LAE was ceded at a fixed rate of 6% of ceded earned premium. Under the reinsurance agreement effective May 1, 2020, LAE was ceded at a fixed rate of 4.75 – 6.0% of ceded earned premium. For the reinsurance agreements effective May 1, 2017 and May 1, 2018, the Company received a 10.2% ceding commission, sliding based on loss ratios of the ceded business. For the reinsurance agreement effective May 1, 2019, the Company received a 10.0% ceding commission. For the reinsurance agreement effective May 1, 2020, the Company received a 10.0 – 11.75% ceding commission, sliding based on loss performance of the ceded business.
Acquisition costs from reinsurance	$ 1.1	$ 2.6	$ 4.7	$ 7.0
Subsequent Event [Member]
Reinsurance (Details) [Line Items]
Reinsures amount					$ 4.1
Metromile insurance company [Member]
Reinsurance (Details) [Line Items]
Paid net			$ 6.2

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Reinsurance (Details) - Schedule of effects of reinsurance - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2021	Dec. 31, 2020
Effects of Reinsurance [Line Items]
Direct Unearned Premium	$ 16,820	$ 16,070
Ceded Unearned Premium		(13,668)
Net Premium Written	34,919	15,107
Net Premium Earned	20,500	14,972
Net Unearned Premium	16,820	2,402
Net Losses and LAE Incurred	34,835	20,933
Net Loss and LAE Reserves	65,476	23,152
Direct [Member]
Effects of Reinsurance [Line Items]
Direct Premium Written	54,330	100,611
Direct Premium Earned	53,580	99,712
Direct Unearned Premium	16,820	16,070
Direct Losses and LAE Incurred	49,536	74,943
Direct Loss and LAE Reserves	65,476	57,093
Ceded [Member]
Effects of Reinsurance [Line Items]
Ceded Premium Written	(19,411)	(85,504)
Ceded Premium Earned	(33,080)	(84,740)
Ceded Unearned Premium		(13,668)
Ceded Losses and LAE Incurred	(14,701)	(54,010)
Ceded Loss and LAE Reserves		$ (33,941)

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Notes Payable, net (Details) - USD ($)	1 Months Ended	6 Months Ended	12 Months Ended
	Apr. 30, 2020	Jun. 30, 2021	Dec. 31, 2020	Dec. 31, 2019
Notes Payable, net (Details) [Line Items]
Total borrowing	$ 5,900,000		$ 31,600,000
Debt interest rate	1.00%	2.00%
Interest and principal	$ 330,000
Capitalized payment			900,000	$ 600,000
Additional funds			15,000,000.0
Debt interest rate description		(as amended, the “Note Purchase Agreement”) with us, as issuer, certain of our subsidiaries, as guarantors, and certain affiliates of Hudson Structured Capital Management (collectively, “Hudson”) with borrowings totaling $31.6 million through December 31, 2020 in the aggregate, along with $0.9 million of capitalized payment in kind (“PIK”) interest. The transaction further provided for additional funds up to $15.0 million over time, from Hudson, the timing of which was subject to reinsurance settlement timing. The outstanding principal under the Note Purchase Agreement was due in April 2025 and bore interest at the following rates: 2% per annum payable quarterly in arrears in cash, and a varying interest rate of 9.0% to 11.0% of PIK interest. The PIK interest was based on the aggregate outstanding principal balance as follows: (i) 11.0% if the outstanding balance was less than $5.0 million; (ii) 10.0% if the outstanding balance was greater than or equal to $5.0 million but less than $10.0 million; and (iii) 9.0% if the outstanding balance was greater than or equal to $10.0 million. PIK interest represents contractually deferred interest that is added to the principal balance outstanding and due at maturity. The loan was secured by substantially all assets of the Company. As of December 31, 2020, the outstanding principal and capitalized PIK interest on the Note Purchase Agreement was $32.5 million, along with $0.6 million of accrued PIK interest not subject to capitalization as of such date. The loan was able to be prepaid in an amount equal to the outstanding principal, accrued cash and PIK interest, and the end of term fee equal to 1% of the principal amount being prepaid. This loan was repaid in March 2021 and is no longer outstanding.As part of the Note Purchase and Security Agreement, the Company issued warrants for up to 8,669,076 of Series E convertible preferred shares, which the Company estimated to have a fair value of $12.5 million at issuance which was recorded as a discount to the debt and was amortized to interest expense over the term of the debt. These warrants were exercised in February 2021 and are no longer outstanding. 2019 Loan and Security Agreement In December 2019, the Company entered into a Loan and Security Agreement (the “2019 Loan and Security Agreement”) with a group of lenders for a term loan in the amount of $25.0 million. Minimum payments of interest were due monthly through December 2021. Beginning in January 2022, equal payments of principal would have been due monthly in an amount necessary to fully amortize the loan by June 5, 2024. An end of term payment of $0.6 million was due at maturity or date of any prepayment. At the time of origination, the lender was granted a warrant to purchase Series E convertible preferred stock, estimated to have a fair value of $0.5 million at issuance. The warrants were exercised in February 2021 and are no longer outstanding. The loan was secured by substantially all assets of the Company.
End of term fee rate		1.00%
Warrants issued for debt (in Shares)		8,669,076
Estimated fair value		$ 12,500,000
Principal amount due			$ 24,300,000
Prepayment charge interest		1.00%
2019 Loan and Security Agreement [Member]
Notes Payable, net (Details) [Line Items]
Total borrowing				25,000,000.0
Series-E Convertible Preferred Stock [Member]
Notes Payable, net (Details) [Line Items]
Estimated fair value				$ 500,000
Effective Date First Year [Member]
Notes Payable, net (Details) [Line Items]
Prepayment charge		3.00%
Effective Date Second Year [Member]
Notes Payable, net (Details) [Line Items]
Prepayment charge		2.00%
Minimum [Member]
Notes Payable, net (Details) [Line Items]
Debt interest rate		9.00%
Maximum [Member]
Notes Payable, net (Details) [Line Items]
Debt interest rate		11.00%

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Notes Payable, net (Details) - Schedule of debt outstanding, net - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Notes Payable, net (Details) - Schedule of debt outstanding, net [Line Items]
Notes payable, net		$ 51,934
2019 Loan and Security Agreement [Member]
Notes Payable, net (Details) - Schedule of debt outstanding, net [Line Items]
Loan and Security Agreement		25,000
Subordinated Note Purchase and Security Agreement [Member]
Notes Payable, net (Details) - Schedule of debt outstanding, net [Line Items]
Loan and Security Agreement		32,461
Paycheck Protection Program Loan [Member]
Notes Payable, net (Details) - Schedule of debt outstanding, net [Line Items]
Loan and Security Agreement		5,880
Principal Amount Due		63,341
Less: Unamortized debt issuance costs and discounts		$ (11,407)

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Commitments (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Commitments and Contingencies Disclosure [Abstract]
Lease maturity description			The leases are non-cancellable operating leases that expire on various dates through 2030.
Rent expense	$ 0.7	$ 0.7	$ 1.4	$ 1.5

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Commitments (Details) - Schedule of future minimum lease payments $ in Thousands	Jun. 30, 2021 USD ($)
Commitments (Details) - Schedule of future minimum lease payments [Line Items]
2021 (remaining six months)	$ 4,701
2022	3,093
2023	3,181
2024	3,190
2025	2,433
Thereafter	11,186
Total minimum lease payments	27,784
Purchase Obligations [Member]
Commitments (Details) - Schedule of future minimum lease payments [Line Items]
2021 (remaining six months)	3,055
2022
2023
2024
2025
Thereafter
Total minimum lease payments	3,055
Leases [Member]
Commitments (Details) - Schedule of future minimum lease payments [Line Items]
2021 (remaining six months)	1,646
2022	3,093
2023	3,181
2024	3,190
2025	2,433
Thereafter	11,186
Total minimum lease payments	$ 24,729

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Stockholders’ Equity (Details) - shares	Jun. 30, 2021	Dec. 31, 2020
Stockholders' Equity Note [Abstract]
Common stock shares authorized	640,000,000	111,702,628
Common stock shares issued	126,727,134	8,992,039
Preferred stock shares authorized	10,000,000	89,775,268
Common stock shares outstanding	126,727,134	8,992,039

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Public and Private Warrants (Details)	6 Months Ended
	Jun. 30, 2021 $ / shares shares
Public and Private Warrants (Details) [Line Items]
Share price per share | $ / shares	$ 11.50
Public warrants redemption description	if, and only if, the last reported closing price of the ordinary shares equals of exceeds $18.00 per share for any 20 trading days within a 30-trading day period on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.If the Company calls the public warrants for redemption, management will have the option to require all holders that wish to exercise the public warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a share dividend, recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of common stock at a price below its exercise price.
Public Warrants [Member]
Public and Private Warrants (Details) [Line Items]
Number of warrants outstanding | shares	7,666,646
Private Warrants [Member]
Public and Private Warrants (Details) [Line Items]
Number of warrants outstanding | shares	180,000
Warrant [Member]
Public and Private Warrants (Details) [Line Items]
Price per warrant | $ / shares	$ 0.01

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Stock Option Plans (Details) - USD ($)	3 Months Ended	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2021	Dec. 31, 2020
Stock Option Plans (Details) [Line Items]
Restricted stock units grants (in Shares)		3,732,115
Share based compensation expense	$ 7,800,000	$ 7,800,000
Total unrecognized compensation cost	41,000,000.0	$ 41,000,000.0
Recognized average period		2 years 9 months 21 days
Total grant date fair value of shares vested		$ 18,200,000
Issued outstanding performance-based awards (in Shares)			150,000
PSUs term		5 years
Expense from PSUs	1,000,000.0	$ 1,000,000.0
Weighted-average grant date fair value per share of stock options granted (in Dollars per share)		$ 7.69
Unrecognized stock-based compensation cost	$ 2,600,000	$ 2,600,000
2021 Stock Plan [Member]
Stock Option Plans (Details) [Line Items]
Restricted stock units granted (in Shares)		4,985,044
Restricted stock units vested (in Shares)		1,252,929
Recognized average period		2 years 5 months 19 days
Performance Based Awards [Member]
Stock Option Plans (Details) [Line Items]
Stock-based compensation expense		$ 2,500,000
Issued PSUs		$ 2,693,061
2021 Stock Plan [Member]
Stock Option Plans (Details) [Line Items]
Common stock reserved for issuance (in Shares)	38,018,247	38,018,247
Dividend yield		0.00%

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Stock Option Plans (Details) - Schedule of restricted stock units	6 Months Ended
	Jun. 30, 2021 $ / shares shares
Schedule of restricted stock units [Abstract]
Number of RSUs, Beginning Balance | shares
Weighted-Average Fair Value, Beginning Balance | $ / shares
Number of RSUs, Granted | shares	4,985,044
Weighted-Average Fair Value, Granted | $ / shares	$ 12.13
Number of RSUs, Vested | shares	(1,684,348)
Weighted-Average Fair Value, Vested | $ / shares	$ 10.78
Number of RSUs, Forfeited | shares
Weighted-Average Fair Value, Forfeited | $ / shares
Number of RSUs, Ending Balance | shares	3,300,696
Weighted-Average Fair Value, Ending Balance | $ / shares	$ 12.82

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Stock Option Plans (Details) - Schedule of estimate the value of options granted - Performance Based Awards [Member]	6 Months Ended
	Jun. 30, 2021
Stock Option Plans (Details) - Schedule of estimate the value of options granted [Line Items]
Expected dividend yield
Minimum [Member]
Stock Option Plans (Details) - Schedule of estimate the value of options granted [Line Items]
Expected volatility	65.00%
Expected term (years)	7 months 6 days
Risk-free interest rate	0.30%
Maximum [Member]
Stock Option Plans (Details) - Schedule of estimate the value of options granted [Line Items]
Expected volatility	70.00%
Expected term (years)	1 year 10 months 24 days
Risk-free interest rate	0.60%

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Stock Option Plans (Details) - Schedule of estimate the value of options granted	6 Months Ended	12 Months Ended
	Jun. 30, 2021	Dec. 31, 2020
Stock Option Plans (Details) - Schedule of estimate the value of options granted [Line Items]
Forfeiture rate	26.20%
Volatility	62.00%
Expected term (years)	5 years 3 months 29 days
Risk-free interest rate	0.53%
Expected dividends
Minimum [Member]
Stock Option Plans (Details) - Schedule of estimate the value of options granted [Line Items]
Forfeiture rate		19.62%
Volatility		47.00%
Expected term (years)		4 years 11 months 12 days
Risk-free interest rate		0.26%
Maximum [Member]
Stock Option Plans (Details) - Schedule of estimate the value of options granted [Line Items]
Forfeiture rate		25.76%
Volatility		62.00%
Expected term (years)		7 years
Risk-free interest rate		1.73%

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Stock Option Plans (Details) - Schedule of activity of stock option plan $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2021 USD ($) $ / shares shares
Schedule of activity of stock option plan [Abstract]
Stock Number of Options, Beginning | shares	5,931,024
Weighted- Average Exercise Price, Beginning | $ / shares	$ 2.61
Weighted Average Remaining Contractual Term (Years), Beginning	8 years 1 month 6 days
Aggregate Intrinsic Value, Beginning | $	$ 70,192
Stock Number of Options, Options granted | shares	4,231
Weighted- Average Exercise Price, Options granted | $ / shares	$ 14.45
Aggregate Intrinsic Value, Options granted | $
Stock Number of Options, Options exercised | shares	(1,089,553)
Weighted- Average Exercise Price, Options exercised | $ / shares	$ 2.21
Aggregate Intrinsic Value, Options exercised | $
Stock Number of Options, Options cancelled or expired and returned to plan | shares	(1,808,157)
Weighted- Average Exercise Price, Options cancelled or expired and returned to plan | $ / shares	$ 2.17
Aggregate Intrinsic Value, Options cancelled or expired and returned to plan | $
Stock Number of Options, Ending | shares	3,037,545
Weighted- Average Exercise Price, Ending | $ / shares	$ 3.00
Weighted Average Remaining Contractual Term (Years), Ending	8 years 9 months
Aggregate Intrinsic Value, Ending | $	$ 45,560
Stock Number of Options, Vested and exercisable to vest as of March 31, 2021 | shares	423,342
Weighted- Average Exercise Price, Vested and exercisable to vest as of March 31, 2021 | $ / shares	$ 2.96
Weighted Average Remaining Contractual Term (Years), Vested and exercisable to vest as of March 31, 2021	8 years 6 months
Aggregate Intrinsic Value, Vested and exercisable to vest as of March 31, 2021 | $	$ 6,367
Stock Number of Options, Vested and expected as of March 31, 2021 | shares	2,034,446
Weighted- Average Exercise Price, Vested and expected as of March 31, 2021 | $ / shares	$ 2.99
Weighted Average Remaining Contractual Term (Years), Vested and expected as of March 31, 2021	8 years 7 months 13 days
Aggregate Intrinsic Value, Vested and expected as of March 31, 2021 | $	$ 30,533

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Stock Option Plans (Details) - Schedule of stock-based compensation expense for employee and nonemployee options - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Total stock-based compensation	$ 12,021	$ 555
Other operating expenses	11,027	302
Cost of revenues [member]
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Total stock-based compensation	225	14
Research and development [Member]
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Total stock-based compensation	630	236
Sales and marketing [Member]
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Total stock-based compensation	$ 139	$ 3

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Income Taxes (Details)	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Income Tax Disclosure [Abstract]
Effective tax rate	0.00%	0.00%
Statutory federal tax rate	21.00%

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Segment and Geographic Information (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021 USD ($)	Jun. 30, 2020 USD ($)	Jun. 30, 2021 USD ($)	Jun. 30, 2020 USD ($)	Dec. 31, 2020 USD ($)
Segment and Geographic Information (Details) [Line Items]
Number of operating segment			2
Total asset	$ 361,101		$ 361,101		$ 202,164
Revenue earned from customers	28,098	$ 7,718	45,374	$ 16,408
Operating Segments [Member]
Segment and Geographic Information (Details) [Line Items]
Total asset	124,800		124,800
Revenue [Member]
Segment and Geographic Information (Details) [Line Items]
Revenue earned from customers	1,000	$ 1,800
Customer [Member]
Segment and Geographic Information (Details) [Line Items]
Revenue earned from customers			2,000	$ 2,500
Insurance Services [Member]
Segment and Geographic Information (Details) [Line Items]
Total asset	119,800		119,800
Enterprise Business Solutions [Member]
Segment and Geographic Information (Details) [Line Items]
Total asset	$ 5,000		$ 5,000

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Segment and Geographic Information (Details) - Schedule of operating results of the Company’s reportable segments - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Revenue:
Revenue	$ 28,098	$ 7,718	$ 45,374	$ 16,408
Contribution:
Contribution	(2,038)	5,205	(4,633)	6,331
Insurance services [Member]
Revenue:
Revenue	26,988	5,887	43,216	13,943
Contribution:
Contribution	(1,173)	4,813	(3,036)	6,501
Enterprise business solutions [Member]
Revenue:
Revenue	1,110	1,831	2,158	2,465
Contribution:
Contribution	$ (865)	$ 392	$ (1,597)	$ (170)

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Segment and Geographic Information (Details) - Schedule of contribution to its total loss from operations - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Schedule of contribution to its total loss from operations [Abstract]
Total segment contribution	$ (2,038)	$ 5,205	$ (4,633)	$ 6,331
Ceded premium, losses and LAE	(2,337)	4,064	(5,242)	6,414
Other income	180	470	1,327	798
Policy services expenses and other	1,692	813	2,063	1,799
Sales, marketing, and other acquisition costs	25,716	(424)	72,883	3,388
Research and development	1,361	859	3,367	2,401
Amortization of capitalized software	2,701	2,799	5,352	5,496
Other operating expenses	16,729	3,965	25,311	9,216
Loss from operations	$ (48,080)	$ (7,341)	$ (109,694)	$ (23,181)

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Segment and Geographic Information (Details) - Shedule of geographical breakdown of direct earned premiums - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Revenues from External Customers and Long-Lived Assets [Line Items]
Total premiums earned	$ 27,758	$ 22,590	$ 53,580	$ 47,371
California [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total premiums earned	16,334	13,015	31,480	27,606
Washington [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total premiums earned	3,379	2,611	6,364	5,324
New Jersey [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total premiums earned	2,749	2,046	5,208	4,243
Oregon [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total premiums earned	1,713	1,723	3,509	3,604
Illinois [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total premiums earned	1,019	1,054	2,060	2,202
Arizona [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total premiums earned	1,245	1,060	2,513	2,162
Pennsylvania [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total premiums earned	741	683	1,398	1,405
Virginia [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total premiums earned	$ 578	$ 398	$ 1,048	$ 825

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Net Loss per Share (Details)	6 Months Ended
	Jun. 30, 2021 shares
Earnings Per Share [Abstract]
Weighted average shares outstanding	1.01547844

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Net Loss per Share (Details) - Schedule of basic and diluted net loss per share - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2020	Mar. 31, 2020	Jun. 30, 2021	Jun. 30, 2020
Schedule of basic and diluted net loss per share [Abstract]
Net loss attributable to common stockholders ($ in thousands)		$ (41,260)		$ (8,898)	$ (144,887)	$ (25,787)
Weighted average common shares outstanding — basic and diluted	126,693,218	126,693,218	8,886,421	8,886,421	101,236,461	8,878,928
Net loss per share attributable to common stockholders — basic and diluted	$ (0.33)	$ (0.33)	$ (1.00)	$ (1.00)	$ (1.43)	$ (2.90)

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Net Loss per Share (Details) - schedule of antidilutive securities excluded from computation of earnings per share - shares	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total anti-dilutive securities	18,562,317	74,069,746
Outstanding stock options - Stock Plan [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total anti-dilutive securities	3,037,545	4,344,819
Warrants for preferred stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total anti-dilutive securities		869,942
Warrants for common stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total anti-dilutive securities	7,846,667	78,371
Restricted stock units [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total anti-dilutive securities	7,678,105
Convertible preferred stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total anti-dilutive securities		68,776,614

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Related-Party Transactions (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020	Aug. 31, 2014
Related-Party Transactions (Details) [Line Items]
Interest rate						3.09%
Revenue	$ 28,098	$ 7,718	$ 45,374	$ 16,408
Chief Executive Officer [Member]
Related-Party Transactions (Details) [Line Items]
Loan amount						$ 400
Interest rate						1.50%
Investors [Member]
Related-Party Transactions (Details) [Line Items]
Revenue	1,000	$ 1,800	2,000	$ 2,500
Accounts receivable	$ 200		$ 200		$ 0