INVESTORS have poured billions of dollars into “fintech” startups, creating hundreds of new firms determined to shake up lending, payments, broking and data, among other financial niches. Insurance, however, has not yet been subject to the same melee. That may be changing.

Insurance is tricky to break into, for two reasons. The most important is regulation. Health insurance—or its American version, at least—may be the most heavily regulated industry in the world. Before a company can even offer a policy, it must have multiple approvals from state and often city agencies and then negotiate agreements with local hospitals.

Running the gauntlet of these regulations is a costly and time-consuming process. A company that set up shop today could not issue any policies before 2018 at the very earliest, says Mario Schlosser, chief executive of Oscar, a company founded in 2012 to provide health insurance to individuals online. It has attracted attention not least because it has managed to secure all the necessary paperwork.

The second obstacle is capital. Fintech firms typically receive backing from venture capitalists to pay for salaries, systems, bright and airy offices and an eternal smorgasbord for employees, but not to support a big balance-sheet. Many tend to structure their operations to avoid holding risky assets for any length of time, acting more as intermediaries between creditors and borrowers, investors and investments, or the sender of some money and the recipient.

This sort of arrangement does not work as well for insurance. Unless a firm serves purely as a broker, it will end up carrying some risk, and the weighty capital requirements that come with it. What is more, customers will not take out policies unless they are confident that the issuer will be around to honour them when a claim is made. But a startup, by definition, does not have the record or reputation that would help bolster that confidence.

Lemonade, an American startup, plans to offer insurance via a peer-to-peer platform—in effect, acting as a middleman. Others, such as Guevara in Britain and Friendsurance in Germany, try to get groups of friends to pool risks, on the assumption that they know better than the actuaries how accident-prone their nearest and dearest are. This also helps get around the problem of confidence.

Metromile, a startup car insurer based in San Francisco, takes a different tack. Its policies are underwritten by another insurer, National General, which was spun out of GM after the carmaker’s near-collapse during the financial crisis. For now, that allows it to hone its technology and increase its customer base. But in time retained earnings, reinsurance and debt could enable it to retain more risk, as more mature insurance firms do.

Like many insurers, Metromile seeks to cherry-pick the least risky customers. For car insurance, that involves working out which are least likely to have an accident. Several big insurance companies, most notably Progressive in America and Aviva in Britain, have begun to use tracking devices or voluntary apps on cars to monitor how safely their customers drive. How fast they go and how hard they brake are just a couple of the factors that can be used to sort the cautious from the reckless.

Metromile, in contrast, tracks mileage. Customers pay a fee of $45-50 a month and then $0.05 to $0.06 cents a mile. There is a clear correlation, Metromile contends, between miles driven and the likelihood of an accident. It reckons there are 75m vehicles in America that are driven only rarely, but insured at a cost of $73 billion a year. Offering a metered option may not only save their owners some money, but also go some way to disproving the view that insurance and fintech do not mix.