I think something we can all agree on for once is that car insurance has always been a bit of a racket. For decades, it meant talking to some old-school agent in a dusty office and handing you a bloated policy priced based on your age, credit score, and zip code… rather than how you actually drive. 

Most of the big-name companies like State Farm, Allstate, and Progressive still operate with that same outdated model, just dressed up with a modern app. But in 2025, one company is challenging all that… and winning. Root Insurance, based out of Columbus, Ohio, is rebuilding car insurance from the ground up, and judging by its 297% stock surge, the suits on Wall Street and the retail traders in their mom’s basement are here for it (the only person I'm guessing who can't stand it is Warren Buffett).

Root’s big innovation lies in how it prices risk. Traditional insurers still rely on massive actuarial tables, pricing your policy based on assumptions about who you are and where you live. Root throws that out the window. Instead, they use your smartphone to track your real-world driving habits… how often you slam the brakes, take sharp turns, speed, or use your phone behind the wheel. 

After a short test-drive period, Root uses machine learning to assess how safe you actually are and calculates your premium accordingly. If you’re a good driver but happen to live in a “bad neighborhood” or have a low credit score, you’re often punished by legacy insurers. With Root, you’re rewarded. This gives them a serious edge in offering lower premiums to safer drivers who are tired of being overcharged based on irrelevant data.

Now, companies like State Farm and Progressive have their own versions of usage-based insurance, like Drive Safe & Save or Snapshot. But the key difference is that Root was built around telematics from day one. For the big players, it's just an optional discount program tacked onto a century-old business model. Root, on the other hand, only insures drivers who meet their risk profile. That means they can be selective… and more competitive. Legacy insurers have billions tied up in their traditional risk pools. They can’t just pivot without disrupting their entire book of business. Root doesn’t have that baggage.

Investors have been paying close attention. Since the start of 2025, Root’s stock has seen an 86%, gain. And on top of that, behind the stock movement is a company showing real progress. Root’s active customer base has grown by 21% this year, now topping 414,000 policies. More importantly, they’re keeping those customers… something many insurtech startups struggle with. Retention is improving, thanks to a tech-first, mobile experience that actually works. You sign up through your phone, take the test drive, get a quote based on your real habits, and manage your policy all in one place. No paperwork, no sales pitch, no 45-minute hold times.

On the financial side, Root is showing it can manage risk effectively. In 2024, the company posted a gross loss ratio of 59%. That’s a fancy way of saying they’re paying out $59 in claims for every $100 in premiums… a much better number than many competitors, who typically land between 65% and 70%. Their gross combined ratio sits at 95%, meaning the company is getting dangerously close to breakeven, while peers like Lemonade are still operating at a loss on every policy sold.

That doesn’t mean everything is going great. The car insurance space is heating up again, and Root will need to keep customer acquisition costs low to maintain its edge. For instance, bigger incumbents are starting to lean harder into digital, and if they figure out how to undercut Root without losing money, things could get tough. There’s also macro risk. Tariffs on car parts from countries like Mexico and China could make vehicle repairs more expensive, which could pressure Root’s margins. Plus, since they partner with Carvana for auto insurance distribution, any slowdown in car sales could put a damper on growth.

Still, the numbers speak for themselves. While the stock may be volatile, the company’s execution so far shows that it’s more than just another insurtech fad. For safe drivers (and for investors) Root is starting to look like the real deal.