I'm not gonna say their marketing wasn't tacky or disingenuous, but do you really want to see the same 3-4 corporations for the rest of your life? If you wanted to see insurance get better, you'd want 1,000 new insurance startups to pop up and to see at least 20 of them get big. People seem to hate big corporations getting away with murder, then equally hate when outsiders try to disrupt their monopoly/duopoly/oligopoly. Please pick a side instead of just hating everything. it's not productive.
@@kevinbarry71 Unpopular opinion: It's good when things fail. You want hundreds of insurance startups failing in unique ways, learning from each other. Then winners emerge with the strongest strategies, and you end up with a more diverse marketplace.
I laughed my head off at the claim of having a “data advantage” over insurance companies. Insurance companies live and die on the strength of their data analysis and they have spent over century building those tools. You take a population of 10,000 people and an insurance company can tell you with a ridiculous degree of accuracy how many will die each year and the causes. The odds are Lemonade’s ‘AIs’ were trained using data and models made publicly available by the insurance companies.
Perfect example of a "smart" sounding dumb thing to say. If you worked at any major insurance company you would realize how backward the tech culture is there. There is absolutely nothing "smart" about insurance. Companies like AIG still have 90% of their customer files as PHYSICAL DOCUMENTS that have never been scanned. It's absolutely unfathomable how incompontent these companies are and how much money they make.
@@wonderfulworldofmarkets9033exactly. I'm familiar with the industry too and yeah there are insurance startups that have a significant tech advantage over the old insurance companies.
@@wonderfulworldofmarkets9033 Dosent matter ; the fact that they have that data and insance cashflow means that they can always deploy it ; its like saying that JP Morgan Chase is not a good bank for startups but SVP is ; well we all know how that one went ; these legacy enterprise dont change cause they dont need to ; cause the industry they work in has too many variables for any tech company to come in and use one cute looking AI and change the landscape forever ; these industries take decades for any change to get absorbed ; enough time for legacy brand to simply come in and do a buyout
@@KH-gp5uf we like their platforms and automated underwriting of what are pretty simple policies. You just need insurance people involved too... You're not going to be able to charge much less or have less stringent underwriting guidelines and still make money. But what you can do well is have a tech enabled insurance company - one which is easy to buy from (and easy to submit claims to) while maintaining strong insurance fundamentals. There are currently a few out there trying to take this approach which I think may be successful.
As someone working in the reinsurance industry, I must say you did a great job in explaining how some of the reinsurance products work, with enough detail and not too much complexity. I can also confirm that reinsurers are one of the most technologically focused companies.
Whenever a company claims their business model is "disruptive", what they really mean is it's unsustainable but they're hoping they can pull in money quickly enough that no one will notice.
Interviewed at Lemonade out of college. Their hiring process iirc consisted of 5 or 6 interviews and multiple take-home assignments. I found a different job after interview #2
New companies looking for investment often act as if their job openings are worth their weight in gold. They try to uphold an image to attract investors I always said more than 3 interviews and I’m out.
@@fartherdude5062 Not Lemonade but some startup in Indonesia with 10 employees. I was desperate back then. They sent me 5 problems to code within 90 minutes. The easiest was converting binary tree to its mirror tree. "They want to hire the best"
Insurance Companies are great at statistics. AI is essentially statistics with a coat of marketting BS. There was nothing these tech bros knew that the insurance sector didnt.
@@bilalbaig8586 the key here is that their experience is still valid today. It's not just being around for 100 years. While risk management gets more advanced over the time the basic principles stay the same
the funniest thing is that the math it is all based on is pretty simple. the insurance companies have "perfect" data on their customers and have hundreds if not thousands of high class mathematicians, real world experience, a network of auditors, etc.. There is not really a lot to even improve upon.
The point with charity is bullocks. Even if they can't take additional money as profit they have an incentive to keep the money pool big so they don't run out of money on future claims. The times you pay without getting anything back are used to fund other's insurance claims. That's just how insurance works
Was looking for this comment - As soon as I heard it, I thought "that makes no sense". Yet another mold-breaking business that plans to add extra overheads while charging less. Oh, and "lack of experience is an advantage". If you want to speed run bankruptcy maybe.
Nah, per the video they are basically just an insurance agent/broker. They give a few quid to charity and act as a glorified AI powered broker that charges you extra to pay to charity
I think it is insanity that people don't understand what insurance is.. it is a shared pool of money that you contribute to that relies on most contributors not requiring a payout on a regular basis meant to cover catastrophic/unexpected events. It started as naval merchants creating a pool of money to cover if a ship disappears. Basically everyone paid into it hoping their ship didn't go missing, but if it did, they'd have a way not to completely go under. Everyone who keeps saying they should get what money they paid into it back doesn't understand the basic premise.
@@lonyo5377 that just pushes the same problem to another party and then back to them with higher fees, once again an incentive to keep as much money in the whole system
<a href="#" class="seekto" data-time="202">3:22</a> Actually, tornados have less of an effect than you might expect. They're the perfect case for insurance: they do a ton of damage, but to a small fraction of a region, and thus risk-pooling the region is incredibly effective and useful. It's a great example of where even for people for whom self-insuring damage to their car isn't worth it, for example, it's still worth getting tornado insurance. Now, houses in the regular path of hurricanes, on the other hand, insurance is silly. Because everyone gets hit by the hurricane at the same time, and averaging things out over just a few years between hurricane hits isn't nearly enough. Premiums for hurricane coverage thus have to be incredibly high.
its literally forbidden to collect unnecessary information, like you can't even charge a higher premium if your genders insured risk is higher. so I don't see how this industry can be disrupted. think of all the regulations too, respectable enough that they even got a licence.
I have a friend who is an actuary. One day I asked him why not just make an ML model that makes sure they don't lose too much based on parameters they get from the customer. He said that is not possible because there is a potential for a blackbox AI or ML model to introduce biases without the actuaries knowing. In the event someone feels they are denied insurance because of discrimination, the insurance company should be able to justify, according to insurance standards, that their pricing is correct. That's why "traditional" insurance companies don't buy the AI hype. If they do have it, it's all marketing for the investors while they do it the old way under the hood
Many people dont care who the insurer is as long as they can afford the bare minimum coverage as required by landlords for tenants or state governments for car drivers.
Sometimes I'm jealous of low American auto insurance premiums, but then I remember the coverage is correspondingly miniscule. Here in Canada I pay about $240/mo USD equivalent, for two cars and a motorcycle, but that's up to $2 million CAD in liability coverage-none of this $20-50k limit nonsense that the States gets up to.
@@moofymoo not really a valid point, the tenant is paying the cost regardless and the exact coverage needed is up to them-choice of deductible vs. premium, level of coverage, when to make a claim or go out of pocket, riders for specific items, etc. Better to have the tenant purchase insurance directly and provide documentation.
Attempted to cancel my renter’s insurance, lemonade proceeded to cancel all of my policies (personal items, auto, etc). A human would’ve been greatly appreciated
@@Samuel-er5bf I was able to get in touch with an agent, however they were in a completely different office, location, and department from the policy controllers. Best they could do was shoot them an email and wait. They recognized themselves the inefficiency of that system, but were powerless to help.
For what it is worth, I work in insurance defense for a Tier 1 carrier in CA and we also handle cases for Lemonade. Lemonade's insureds in CA get Tier 1 litigation counsel. If you can get Tier 1 litigation counsel for less than if you bought a Tier 1 policy, that is a good reason to insure with Lemonade, regardless of the company's profitability.
I'm on my 2nd lemonade renters policy now and the company is great. They are an easy company to deal with. From the customer side, the experience is great. $5 a month for a policy that will cover up to $10k in losses at a whim is an easy buy for me.
A $5 policy isn't really significant enough to draw any conclusions. Their prices for homeowners insurance were awful compared to what a traditional insurance agent was able to find on the market.
I do think that the insurance industry may be ripe for disruption in some respects, but relying on policyholders to refrain from "embellishing" claims b/c of the "charity donation" isn't a good strategy.
You can say that about the huge companies in any industry. Disruption can only happen when someone truly discovers something the entrenched companies overlooked. It has to fundamentally shift how business is done in the industry. Lemonade tried to beat the insurance companies at the same game thinking they could do the math better. Surprise, the companies who've refined their models over a hundred years know the math better.
What a fabulous introduction to Lemonade and the possible over-selling of AI capabilities by techies trying to get higher valuation for not so special companies! Great job! I would love to see a similar deep-dive on some of the leading SAAS companies.
I had a tenant who used Lemonade for their rental insurance policy. Once they made the claim, Lemonade said no and they now owe my traditional insurance company a payment plan for the next 15 years. The adjuster just said, “that is what you get for going with a company called lemonade.”
Just gonna say Metromile's been pretty good as an end-user. Although its premiums have risen recently. Still, I've done comparisons and I'm paying less than if I switched to a different brand, at least for now.
Insurance is not an easy-to-disrupt industry. Lemonade’s efforts are commendable. However, what such organizations get wrong is that they try to oversimplify a complex topic and don’t give enough time to observe the risk patterns and then struggle with the pricing issues eventually. There is a delicate balance between pricing and customer value that is achieved over time. A typical insurer takes more than 7 years to breakeven so one needs to have a long term strategy. Technology can solve many things but not everything.
Some of these things DON"T NEED DISRUPTION. I LIKE having humans review important records. I can argue with a human. I can't argue with an ai. Not like, they're even cheaper. They're often MORE EXPENSIVE than the old school ones.
wow thank you for the amazing research. it must take a long time to understand these operational details for many different companies. my takeaway is: lemonade has been killing their own profit margins for no reason.
Having AI determine whether a claim is fraudulent sounds like a sure fire way to get sued into oblivion. Especially since it's not even really possible to begin with.
FYI the reason why older homes, or home with older roofs/heaters/ect… isn’t maintenance, which is never covered, it’s because it’s more likely to be damaged (ex: strong winds rip the shingles out and damages something)
No, an older home is more solidly built and more likely to survive storms, and has already survived many. The reason they’re more expensive to insure is that they are built with very high quality materials and with labor intensive construction techniques. I had a house that was built in 1915 and all the floors were oak, and all the walls were plaster. That made it ungodly expensive to insure.
Right but there is potentially some money to be made by cutting out the insurance agents. Fuck, I use lemonade simply because I'd happily pay a premium not to deal with an insurance agent. Whether or not Lemonade is a good play there is 100% a valuable market that removes the local agents.
I was a lemonade customer on a condo insurance to satisfy the HOA, picked lemonade due to their easy policy signup via the app. The problem is year over year when they renew my policy they increased my policy cost by $100 (30% !) each year with some bs add on coverage I don’t need without even getting my permission on auto renew, I had filed no claims at all also in those years, finally got so fed up with this shady practice I cancelled with them. If they just remained honest like the ads said and kept my policy price the same with minor increases I would stayed with them forever, their loss not mine.
I've only ever had to put in claims for my dog's medical bills but I've never had an issue getting my claims approved. I also like the fact that I've never had to talk to an actual human for anything
Quota-share reinsurance does not work the way you described it. (You basically described excess of loss reinsurance twice but with different levels of retention) The way quota-share works is you cede x% of your premiums and losses (so if you have a 1$ loss you cede x$ and if you have a 1,000,000$ loss you cede x * 1,000,000$) and then reinsurance company will send you back a portion of your ceded premium as commission for underwriting the policies. It's basically insuring a risk with a partner.
Can confirm. I worked for a company that partnered with Lemonade for a short time, then almost immediately cut that partnership due to how bad they are. It was also almost impossible to reach someone there, even as a partner company.
Curious as to why Amazon and Google dropped out of disrupting the industry? Insurance is hard, the fine line between gambling and predicting the future, with progress and deterioration rapidly increasing volatility… but hey techies think they know everything.
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Lemonade has reason to be concerned. At least six Florida insurance companies have shut down, all operating similarly: acting as middlemen, they purchased re-insurance to handle claims. However, they struggled to secure affordable re-insurance to cover claims adequately. The issues mentioned by the owner in the interview, such as stolen cell phones and identity theft, are typically considered "upsell" items. These are offered at low rates by insurance companies because they anticipate minimal usage. Yet, if claims for such items persist, insurance companies stand to lose money. This explains why insurance companies often drop customers who file such claims. Insurance policies are primarily intended to cover catastrophic losses.
State farm being one of the largest insurers and being one of the pioneers of auto insurance rating vs flat rates i would almost garuntee has more customer data than lemonade
If Lemonade is in phase 3 segmentation, couldn’t that be a potential reason for their loss ratio being higher? Ie their algorithms more accurately price premiums to reflect payouts and instead of charging higher (closer to average market rates) and pocketing the rest, giving the surplus back to customers in the form of lower premiums?
In my mind their high net loss ratio is due to their low premiums, not due to a fault in underwriting causing higher claims. They are the newcomer, they need to attract customers with lower prices.
Feels like a classic with Softbank involved, too band Credit Suisse did not, as the window for their shenanigans to have added to a companies backstory story is closing.
Basically the way you describe the relationship between an insurer and reinsurer is pretty much the same concept as in the music industry Artist signs with a small label, Has a distributor deal with bigger record company... Artist gets the short end of the stick
Taxis have taken a huge hit since the introduction of Uber. I'm an Uber driver myself and have spoken to multiple taxi drivers about it. Outside of large cities taxis are basically dead.
At <a href="#" class="seekto" data-time="638">10:38</a> you said that the reinsurance company pays 100% of the corresponding claims. This is not the case as that is not how quota share reinsurance works. The snippet you are reading from provided by lemonade appears to be intentionally ambiguous. Just thought I’d clarify that the same proportion that is ceded is the proportion in which the claim is paid.
As a 5-year customer and investor, I think they do a fine job on ease of signing up and their claims process worked as expected. I had two claims, one of which was covered and the other was not covered in my policy. Don't have anything bad to say about them, but I realize the disruption advantage to the industry may not be as significant as once thought.
Videos like this make me more bullish on LMND. Good overview, but it’s analysis that’s wide and about 2” deep. I continue to add to my position and see them scaling to profitability in 2026, as they have guided for.
No - they need to refund the policy holders if there are excess funds left over. If I pay you 3600 a year and when its all over with there's 300 surplus refund to me and let me decide what to do with it. Mutual insurance companies do that. Great post and I priced Lemonade and they were sky high and I have no claims no drama nothing bad and they were one of the highest quotes.
They rely on the laziness of "digital natives" to do their insurance shopping online and overpay premiums rather than finding a broker or calling multiple companies for competitive premiums. I get overpriced quotes from them just for fun.
The only way to disrupt a thoroughly regulated industry like insurance is with an army of lawyers and state politicians to change laws. Even the insurance brokers are regulated at every part if the sales process
It seems like these outsider “disrupters” only see opportunity because they don’t know enough about the industry. And if SoftBank likes the cut of your jib … that doesn’t bode well.
Let's find out in 10 years whether they 'failed'. Turning cash flow positive, reaccelerating revenue growth, loss ratio down 15 percentage points year over year - trading at a P/S of 2 instead of 20 at IPO - pretty interesting.
I’m not understanding their business model. If they’re “donating” the left over money from claims and they don’t invest the float( which is very lucrative, ask Warren Buffett) how the hell do they make money? And how is that sustainable?
If you analyzed Tesla in 2015, you would have said that they failed to disrupt car companies. Give Lemonade another 3 years for their story to play out and you'll see a big difference in their financials.
When I heard App, AI, and charity I already knew enough. Pretentious manbuns who think they know better, then Larp at it until the money given them runs out
lemonade is the cheapest way to convince the mortgage company that you have home insurance. will be funny when the company runs out of zombie money and policy holders are forced to buy sustainable insurance.
High Risk customers pay too little and low risk customers pay too much??? The whole idea of "Insurance" versus "gambling" is not to assign EXACT probablities to each individual customer (Gambling), but to have a large enough insured group of people so that you can reliably predict how many claims at what cost and base your average rates to those people in that same group. Essentially, insurance is spreading the risk evenly to everyone in that group b/c probability is not predictable in small sample sizes and you don't know who will get sick/accident and who won't. The insurance company gets the premiums ahead of time and supposedly makes money by investing the unused premiums until they need to be paid out. Don't believe me? Go ask Warren Buffet who owns GEICO and you state insurance commissioner.
It's commendable how Lemonade aimed to revolutionize the insurance industry with AI and a digital-first approach, highlighting the need for innovation in an age-old sector. However, their struggle to turn a profit underscores the complexities of disrupting such a vast and entrenched market. 💡
It's basic economics: the insurance market is at equilibrium. There are enough sellers to satisfy demand and margins at the bare minimum. One additional insurance offerer means another has to exit the market. To push out an existing insurance company takes a ton of money. You spend billions and end up in a low margin industry with no growth prospects. Genius.
Their renters insurance is great. First apartment was monthly low payments, second apartment was a full year balance up front which was still affordable. Ai helped a lot and when it couldn’t a human answered all my questions.
Lemonade didn't price its products effectively thus resulting in underwriting losses. Same story, different company. I've been in insurance since 2016. Lemonade isn't a disruption company anymore.
Honestly the best way to make insurance better is to put some of that money in stocks as an insurance fund. Creating a pool from which money can be pulled to pay for claims
That's how it works. Insurance company stores money in liquid investments and offers insurance to anyone who asks because they are always overcollateralized. Berkshire is a reinsurance company which is why buffet manages big investment funds
Them: "We hate monopolies, it's bad for consumer choice and they drive up prices. we need more options!" Somebody: "Okay, I will try to do something different to give you another choice, it won't be easy though." Them: "haha look at these idiots...who do they think they are? trying?? what an idiot with no credibility. stop trying buddy. i'll stick to my corporate monopoly with experience, thank you very much"
I have worked on the internal algorithms of financial product offerings. AI is a buzzword: there have always been complex models that are depended on a large amount of variables. There is just no 'leap' innovation that AI provides here. What you can innovate with is on the maintenance of those complex systems. And they do this already, a lot of brands share the same software technologies but tuned a bit different to their own likings to save money. Maybe AI can help in keeping these complex systems in check and keeping them maintainable and cheap(er).
TBH the AI facial technology announcement was what actually caused me to leave Lemonade permanently and switch to another insurance carrier. Just one of the things I am personally super uncomfortable with when I am in a situation of crisis. I used them for nearly 18 months up until that point. A shame, really.
I tried it after buying my home. The prices they offered were awful, much much higher than going through an old school insurance agent recommended by phone by an old school real estate agent.
As an investor myself, I actually don’t mind if they become more like a “traditional” insurance company. I think the customer friendly way of getting an insurance is great. Currently, I feel like getting insurance is a hastle, if I check on the internet, I actually don’t really know what I can get insurance for exactly. If I want something, I have to talk to an agent. Having this on an app with a chatbot helping you out sounds like a great idea to me. Maybe I’m wrong, but why not give it a shot.
Some businesses just work. Insurance works the way it is. I will say as an agent that it needs some upgrading but over all there is a reason that insurance is profitable, and why the same companies have been around for a long time.
I disagree. The fact that I only got rental insurance is because of lemonade. I wouldn't have gotten it otherwise. And making less money or no money doesn't mean it failed, it just mean the customers are getting good deals.
Something that I didn’t hear covered was / is how a lot of insurance companies will operate at a loss in order to get your money in order to invest it with the goal of increasing in value MORE than they have to pay out in claims.
As an insurance professional… interesting video. Lemonade would have had a better shot at being a direct to consumer independent broker/agent with their AI. I work in a larger payout field so to see profit margins on a minuscule $5k claim made me chuckle. Numbers are slightly skewed as well as there’s no reference on deductibles with respect to the claim. Besides renter’s policies the minimum claim amount is drastically going up as parts and labor has only gone up.
You left out one of the very important aspects of the insurance business, underwriting investment profits. You take the premium dollars and invest them, if you do well in the market, this mitigates losses on th underwriting side. So essentially insurance profit and losses are premiums - claims plus investment offset by reinsurance premiums and payouts. Often the premium investment profits can make the difference between a profitable line and a loss.
well, it's at most it's really changing somethings, at the least tho, it's a regular insurance company. SO it is incrementally better in the way it processes claims. So it's worth allocating a small amount as I have.
Wow we really went through an era where tech went into industry’s failed to revolutionize anything(Uber,door dash, insurance) and back to square one except everything was much cheaper when the tech bros didn’t charge insane fees in that specific industry.