Yup, it is - note the helpful ‘SHOP’ hashtag at the bottom.
So Ariely has taken his Predictably Irrational model of the world to make lemonade (and profit!) from lemons?
I couldn’t say - I had never heard of him before today.
But the whole thing set off my bullshit detector. Five alarm.
It was an interesting read, at least. In reality, I’d love to chat with the guy - http://danariely.com/books/predictably-irrational/
I’m not saying that the insights into decision making aren’t useful.
Just that corporations aren’t monetizing it to benefit anyone other than their investors.
Well, of that lot, XL and Allianz SE are both major global insurers/reinsurers, so I bet their backing (provision of risk capital) is somehow linked to the reinsurance that Lemonade is buying. I’m not saying this is a bad or suspicious thing, BTW, but it does point out that ‘traditional’ insurers do not need to either dilute or risk their brand in these new techy/disruptive ventures, or invest in setting up one as their own subsidiary (as some may have done). Provision of risk capital to a ‘trendy disruptor’ is just another route to market for global risk capital.
It’s all hype
My home insurance is nothing compared to my car insurance. I mean, liked 1/10th
Yep. It’s a B Corp in one slice of its business. The rest is pure profit. Like WeWork seems - marketing capitalism on socialism and community. Here comes the new boss, same as the old boss.
“ Lemonade is actually two companies. It is a risk-bearing insurance company AND a brokerage firm. When you buy a policy from Lemonade, the 20% fee goes immediately to the brokerage firm. The remaining 80% stays with the insurer. The paper on which the insurer is based is a B-corporation, which essentially makes it a non-profit. So it is the brokerage part of the business that is the money maker. That is the entity that secured all that seed-funding. Sequoia Capital knows a thing or two about making sound investments. They don’t do non-profits. And once the fee from the premiums that the policyholder pays gets swept into the Lemonade’s brokerage company, it will not be used to pay claims, at all…ever. It is income, free of insurance risk. If the insuring entity ever goes insolvent, all the fees will be protected.”
A very insightful analysis, in that article. A couple of extracts below.
Had I had more time earlier I would also have noted that
Super fast claims handling (which on their website, they tout as a check in minutes), invites fraud. I think there is a major conflict of the business model. If your marketing message is that you can get a claims check in a few minutes without having an adjuster or claims rep work the claim,
… is basically inviting adverse selection from fraudsters.
Basically, Lemonade is mostly very good PR and marketing with a slightly tweaked but still traditional insurance model with added technology-enabled automation.
Lastly, I want to challenge the major premise of Lemonade, that insurers make money by denying claims. As a professional in the business for 20 years, this is the one selling point that Lemonade and it’s marketing keeps touting that upsets me the most. It upsets me because it isn’t true. In fact, I have seen the opposite. I have seen emails or communications from senior executives to staff adjusters onsite during a natural disaster that flat out instructed their adjusters to move quickly, be fair and if there is any doubt about the damage, settle IN FAVOR of the policyholder.
But I guess it takes less marketing spend to persuade millennials that other insurers are evil and will never pay your contents claim.
This may be true, but it is definitely irrelevant.
Over the course of a lifetime I will (probably? possibly?) pay as much or more in insurance as I claim. If I collected all that money, and invested it wisely|luckily, then looking back at the end of my life I would be “better off”. However that is scant consolation here now where I am looking forward to the rest of my life. If my house burns down tonight, I’m not going to be able to sit comfortably on the ashes happy that in only another 50 years I will be better off.
So as someone who recently moved to the US and likes the idea of a B corporation being at least somewhat involved in my insurance decisions, and given your clear hatred of Lemonade, do you have an alternative you’d like to recommend for my new shiny USD?
I don’t hate them - the faux marketing as being nonprofit when it’s just a veneer to funnel biz to the for profit does piss me off.
As noted above - mutual insurance companies are owned by the policy holders
And there are several employee owned companies
And - I’ve always liked Ben. He’s going nowhere.
But I have no issue with buying from an insurance company that just is good at their biz and doesn’t try to bullshit customers.
I buy the bare minimum insurance required.
when I am renting (as at the moment), I have no insurance at all.
when I am a home owner (as I have been several times and will be again shortly) I have the building insurance as required by the mortgage company.
I have consciously made the decision that if something happens, I will repair/replace/do without. So my house is covered but nothing else.
Insurance has income from premiums that covers 1. Claims 2. Operating costs and 3. Profit! Lower premiums should focus on 2 and 3 (to be of benefit to me and you)
NRMA here in Oz offered cost effective insurance via a mutual, but ended up being corporatised, apparently because cheap insurance is “Bad”.
Got to wonder at the editorial in this Wikipedia entry:
NRMA Insurance’s financial success led to a surplus in funds which could not easily be distributed back to members. Insurance premium rebates to members had the effect of artificially and harmfully deflating the price for NRMA’s insurance products. Demutualisation, whereby members exchanged membership rights for shares in a listed company, allowed funds to be distributed to members without affecting longer term product pricing."
Wow. Even harder pass for me now.
(Allianz makes sense and is okay, assuming they are the insurer’s insurer.)
It is breaking the mould?
I had an HO6 policy through American Family Insurance. They’d been my insurer for 24 years, both at the house I live now and in the apartment I lived in before. I never missed a payment, never made a claim… until a few years back; I had a leak occur under my kitchen sink, and then a month later a leak behind my main floor bathroom’s toilet. They paid out, and then cancelled my policy without telling me. When I found out I had mere days to find another insurer or else my mortgage company was going to install their insurance.
All that said, I’m not inclined to give Lemonade a try. “If it sounds too good to be true…”
Insurance companies, by and large, exist to make their investors/owners money. Ultimately, they will only help their customers as required to stay in business.
I originally thought this was a sarcastic response to your first comment.
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