Originally published at: https://boingboing.net/2019/12/17/lemonade-is-breaking-the-mold.html
Originally published at: https://boingboing.net/2019/12/17/lemonade-is-breaking-the-mold.html
Whether you own or rent your place, insurance on that home is a necessary hassle
Listen, money doesn’t come from nowhere. For an insurance company to operate, it has to be paying out less in claims than it’s making in premiums. Stastically, if you pay for insurance, you’re taking a loss. It’s only the minority of customers who will end out ahead.
People only treat it in a different class than lottery tickets because the stakes are so much higher, and emotion gets in the way. But either way, it’s a sucker’s bet.
Unless you own your home outright, I’m pretty sure the bank is going to insist you have insurance. For me, it’s not about ending up ahead, it’s about surviving a catastrophic event.
Odds are the catastrophic event will happen to someone else, not you. Would statistics lie?
I live on the gulf coast, I toss the dice multiple times every hurricane season.
You don’t buy insurance as a profit center or as a way to break even on your savings.
You don’t expect fires, or floods, or theft in most cases. If you want to put a couple hundred thousand away or whatever your insurance payout will be as a hedge and enjoy the interest on it, enjoy! I am envious of your financial situation.
Most people don’t have that option. Loss of ones hone or belongings may be devastatingng to many. The pittance of premiums you pay out is a small price to pay to recover from that devestation And will have little or no resemblance to what you paid in, which is the point.
The incremental benefit to your life that pittance will give back to you if you spend it (or save it) will not save you in a crisis, which is, in fact, the point.
The savings do not warrant the risk in my estimation. But then, I suppose the venn diagram of those who dispute this and the even diagram of those who believe universal healthcare is a sham is likely nearly a circle, too.
I will go further an bet they are also far outside the circle of folks who either have, or know others who have faced devastating loss that was in fact mitigated by preparedness (again, the top earners notwithstanding)
If insurance, in general, is a losing proposition, then renter’s is the worst.
Sure it doesn’t cost much, but it pays NOTHING.
A basic policy covers only fire and theft. The landlord already has insurance for fire, so at best, you’re only insurance for theft. That’s limited to a couple thousand, unless you add more to the basic coverage, say $5k at a time.
Unless you live in a place without locks on doors and windows, skip it. Sometimes, a landlord will insist on proof of insurance to move in. You get the minimum, and stop paying it. They won’t check again.
I made one claim in 35 years of renting, and it was denied. I had to sue the landlord in small claims court. Weird how I could convince a judge with real evidence, but the insurance adjuster said no way.
Hrmmm - landlord insurance covers 0 stuff that is mine - it covers their house. I pay like 200 a year to cover all my stuff if a fire or tornado or some other catastrophe hits - or if I do something negligent (but not intentional) to damage the property.
I’d call that a bargain. Then again I saw the number of people unable to claim any of their stuff after a tornado hit - or a fire - that I don’t wanna be on the wrong side of that equation. One total loss would take 250 years of premiums before I broke even - so I’d say that if I need it - I’ll always be ahead - and if I don’t it’s just good piece of mind.
It’s from Stack Social, the brand that continues to bring you surprisingly inexpensive lifetime VPN and backup storage subscriptions. I expect “Lemonade” insurance is every bit as trustworthy.
For their property/building and any fixtures/fittings contents that they may own. This does NOT cover the tenant’s fire/theft risk for the tenant’s property. It amazes me how much people do not understand insurance. Including the first poster
Nobody ends up ahead. It is a mutual pooling of risk and once mutuals became limited companies the companies’ shareholders (providers of risk capital) also get some profit. If you have no claim you didn’t ‘lose’ anything, you had cover in case you did have a claim. If you have a claim you are put back in the position you would otherwise have been in had you not had a claim - you do not ‘make’ anything and are not ‘ahead’.
And what’s with the ‘flat fees’ of Lemonade? Are they an underwriter or a broker?
Well, they are an insurer. Just like any other, they just have a slightly different business model, which is more like a mutual bolstered by low costs through use of technology.
Lemonade was built differently. We take a fixed fee out of your monthly payments, pay reinsurance (and some unavoidable expenses), and use the rest for paying out claims. In essence, we treat premiums as if they were still your money and return unclaimed remainders in our annual ‘Giveback’.
There is a ‘philosophical’ debate about whether an insurer which hypothetically reinsures all of its risks is in fact a broker masquerading as an underwriter. It’s not much different to a broker given underwriting delegated authority under an agreed scheme with an insurer. How much of Lemonade’s risks are reinsured? Can’t immmediately find out, but their structure is basically an underwriter (insurer) fronted by a ‘captive’ broker which takes the fees. Not really that much different in effect than traditional models except that its broker arm does not operate on commission (which most of the rest of the broker world does) but on a flat fee.
Lemonade is the brand name for products and services provided by one or more of the Lemonade subsidiary companies. Lemonade, Inc., a public benefit corporation organized under Delaware law, is the parent company of the group. There are three subsidiary companies under it:
- 1.Lemonade Insurance Company (issues your policy and pays your claims)
- 2.Lemonade Insurance Agency, LLC (acts as the sales agent for Lemonade Insurance Company and provides certain underwriting and claims services while receiving a fixed percentage of premiums for doing so)
- 3.Lemonade, Ltd. This company provides technology, research, and development to the group
There may be a tad more transparency but can I find out what the flat fee actually is, any more than I can (i.e. cannot) find out what commission my broker is paid for recommending an insurer and arranging my policies? Can I find out if the Lemonade Insurance Company makes ANY profit or operates at a pure breakeven and the only profit in the structure is the flat fees from the agency (tied broker)?
The use of technology for distribution (sales) and claim and other operating matters may be ahead of the curve relative to the rest of the insurance world. The financial model my be slightly different. Dealing with simple, cheap, templated coverages makes processing cheaper and reduces risk (i.e. makes it easier for the underwriters to reliably rely on statistical models). But at root, it’s insurance just like it always has been.
And here’s how the ‘mutual’ (charity) bit works.
Lemonade’s Schreiber explained, “After you get a policy at Lemonade, we ask you to select a cause you care about most. Unclaimed money goes to that nonprofit of your choice at the end of the year. By building an insurance product that is based on social good, rather than a necessary evil, we can give
back up to 40% of your premium to a cause you want to support.”
He added that this behavioral economics hack could also be good for Lemonade’s business as an insurer. “By urging our policyholders to choose a cause to ‘give back’ to, we are creating a community of like-minded individuals, building trust and reducing probability of fraudulent claims. If someone embellishes their claim, they are only depriving their cause.”
Oh, right, so nobody would EVER embellish their claim (not trusting ANY insurer not to negotiate it down) in case their chosen cause received a few cents less!! Good grief!
(Source of above quote:)
You can buy insurance online!
This review says they don’t have a AM Best rating for their financial stability and resources.
It notes that claims come right off of premiums- with excess refunded. Which sounds good until you consider that in large catastrophes - like Sandy or Katrina or an earthquake- the company needs huge reserves to be able to pay out.
But - hey - an app! And AI!!!
There’s a big difference between lottery tickets and home insurance payments. The lottery ticket is a wish you’ll get something you don’t have. The insurance payment is hope you won’t lose something you already have and which would require you to win the lottery to replace.
The average savings account in America is $16,000 (the median is a paltry $5,000), which makes home insurance an absolute necessity. No one is going to be able to replace their home and their belongings with those amounts. Insurance can ease that blow. I’ve seen this same logic used for health insurance, car insurance, etc, etc. But the way things worked before those things existed suggests to me its far better to pay them and hope for the best than to not and run the risk of the worst. In other words, I’d rather have them and not need them, then need them and not have them.
Okay- so they’re a broker and you don’t know who your insurance is bought from and their financial status.
Or if Lemonade is owned by these insurance companies and it’s marketing and their laying off risk if things go bad - hey - that’s lemonade- not us! That money can from someone wanting growth company level profits.
Also - are all the lemonade family of companies B Corps - or just the forward facing one and the others are the profit centers?
All natural Odwalla! Owned by Minute Maid which is owned by Coke.
No, it’s pretty clear up to a point (the point beyond which I have not researched).
The Lemonade sales agency is wholly owned by the Lemonade insurance co. Why they need to have a separate sales agent and insurer is unclear. (In the UK all insurance was sold via brokers until Direct Line came along and sold direct to the consumer - I do not think DL has this kind of structure but I may be wrong.)
So your policy is with the insurance co - they state that quite clearly.
What is not clear is the extent to which the insurance co lays off its risks to the global reinsurance industry. If it lays off 100% (unlikely) then the insurance co is much the same - in business model terms - as an agent or broker, but in practice the insurance co has the insurance contract and it must recover its claims costs from reinsurers. If it only lays of a portion of its risks, then it MUST have sufficient risk capital (as determined by the regulator) to meet those liabilities. Does it?
Too many open questions and I am not inclined to research further. I am just pointing out (and we seem to agree) that people ought not to be taken in by this new model ‘woo’ - certainly not without researching it or retaining some scepticism. But millennials, eh? Apps, charity, being conned into thinking they are doing business with a better class of capitalist…
“ Lemonade Inc. is backed by investors including Aleph, General Catalyst, GV (formerly Google Ventures), Sequoia Capital, Thrive Capital, XL, and Japanese tech investor SoftBank,”
“ the company announced additional investors: Allianz SE and Ashton Kutcher’s Sound Ventures. In December 2017, Softbank invested an additional $120 million in Lemonade in a Series C round,”
But - Lemonade Stand! Privately held insurance company using the tech company venture cap model for other businesses before going public. Like WeWork. And Uber.
Also - doesn’t this sound like a little slice of hell?
“ Lemonade uses artificial intelligence in the form of chatbots and machine learning to provide insurance policies and handle claims,”
“ Duke University professor, author and economist, Dan Ariely is Chief Behavioral Officer at Lemonade with much of his research on behavioral economics integrated into the DNA of the company, in pursuit of transforming the adversarial relationship between client and company
Building a neurally trained, very polite chat bot to deny your claims…
And behavioral manipulation to make you feel guilty for even filing a claim.
Lemondade Bot: “Are you sure you want to take away money from starving children by filing a claim? Here’s a picture of Juan. He’s 6 years old and just about to get a vitamin A shot that will prevent blindness. Do you want Juan to go blind? Listen to this video of Juan begging you not to file a claim…”
Is this an advertisement?