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Show HN: Lemonade – the world's first P2P insurance company
- sbuttgereit 10y agoSo... what are the supported causes? What is the criteria for a cause to be qualified for support? There are charities and causes I do support and there are those that I don't. There are charities that oppose each other in their stated goals as well. I see a section that talks about becoming a supported charity, but nothing about criteria or who is already in.
- h4nkoslo 10y agoI would be surprised if it did not devolve into a kickback arrangement at some point. Benefit corps are a solution to a problem that doesn't really exist but gives a ton of leeway for under the table dealing. Not saying these guys have any particular reputation a priori, but when the structure is set up for it, it tends to happen sooner or later. "Note, the Giveback is currently not recognized as a tax deductible donation- sorry!" So it's actually worse than a standard mutual insurance dividend / rebate which you could donate yourself.
- allendoerfer 10y agoHow is this more "P2P" than other insurance companies are? Non-profit, yes, but the mechanism seems to be the same. There is still a central pot everybody pays into. I would like a non-profit that just pays back the spare money even more. I do not know how this would work with regulations. I guess in Germany this could be done through a "Genossenschaft", which Wikipedia tells me has an US equivalent called co-op. Would this actually work? Edit: Realized that you could just grant discounts as there cannot be a profit anyway. Would be awesome to see several companies with the same model, first competing on prices and ultimately the percentage of the fixed fee.
- jsloss 10y agoNot sure how to answer your question directly but perhaps you're missing a bigger point. The price and ease of use difference compared to legacy companies is huge.
- allendoerfer 10y agoWas not criticizing the company at all, just wondering why it calls itself P2P and whether my payback model would work.
- daschreiber 10y agoDaniel from Lemonade here. Totally understand how P2P can be confusing as a term. What we mean by it is that we use each group's premiums to pay their claims, with leftover money going back to the group's common cause. To us P2P is a shorthand for: 'it's not our money'!
- madebysquares 10y agoWhile I understand the sentiment it seems like a confusing message to put out there. With the "P2P" label when it's not a typical P2P model.
- vertex-four 10y agoIt's generally difficult to find any form of funding/backing as a co-op, as it's far riskier when your sources of funding can't vet all the people who have legal power to push your organisation in a certain direction.
- hujun 10y agoAccording to the video ("The Science Behind Lemonade") linked on the homepage, it seems the key difference is this company take a flat fee while other insurance company "makes profit" from declining claim , so the Lemonade has no incentive to decline a claim which makes the claim process fast; and also they donate the extra profit to charity
- MisterBastahrd 10y ago... extra profit donated? Why would I choose that over lower prices?
- mmanfrin 10y agoThat doesn't sound right -- a claim should be paid out or denied based on the veracity of the claim, not on the profit motive of the company. Sure, a for-profit company has extra incentive to vet claims, but so does Lemonade (since they dont want to be swindled). Traditional insurance companies make their margins on the cash they have to hold on hand.
- Jarwain 10y agoThey're capitalizing on the lack of trust people have for typical insurance companies. Even though a claim "should be" paid out based on the veracity of the claim, I think there's a population that doesn't trust the insurance company to operate this way.
- kateho 10y agoI'd agree with that. There's a general feeling that people are surprised when their insurance companies pay out/cover some big cost (like rot), rather than it just being part of life. That says something about how much we trust existing insurance companies.
- germanier 10y agoThe structure you describe is called "Versicherungsverein auf Gegenseitigkeit" in Germany. They are the oldest kind of insurance and still occupy a respectable portion of the market. Public social insurance is even more P2P than that as dues are calculated based on actual payouts. This is most pronounced in the mandatory worker's accident insurance where employers just pay their share (based on size and risk profile) of last year's claims in their sector.
- germanier 10y agoThe English term for that is "Mutual insurance" and they exist in almost any country.
- mikeryan 10y agoThis looks awesome I might check it out. But the "P2P" branding is likely going to be confusing to a lot of people. In fact even after reading the explanation I still don't understand the peer to peer model in this context and I know what Peer to Peer means.
- zingermc 10y agoMy guess is that they are using blockchain, but I cannot find any real details on their site, blog, or FAQs.
- maerF0x0 10y agoI was really hoping it was like the p2p lending where I choose who is in my insurance pool and thus my vetted circle bear eachother's costs, but not the costs of those outside my circle. So I can tell my stinky aunt that I wont underwrite her health insurance until she quits smoking.
- CodeWriter23 10y agoI got to "enter your name" and leaked out of the funnel. I'm willing to give up my zip code to find out how you compare to my current provider. Give me some good rates to entice me out of the rest of my data.
- SandersAK 10y agosame
- gilsadis 10y agoHey, same here. Can you share more details? Thanks for letting us know btw.
- x2f10 10y agoI will answer you as nobody else will. Hacker News users are interested in this idea, but don't want to divulge their actual address to get a "price quote". Ideally, they'd like to give their zip code and get a round-about dollar figure they can use to compare to their current pricing.
- Faaak 10y agoCan't they just give an address nearby instead ?
- svens_ 10y agoSure, that's what you could do if you really wanted to know. It's not really a "refreshing" experience though - their main selling point.
- gilsadis 10y agoFair enough. The reason we ask for your name first is because we want to create a more personal chat experience. We believe that buying insurance should not only be instant but also delightful.
- executive 10y agoapp != P2P
- vjvj 10y agoCool concept, looking forward to seeing roll out. Under your definition of p2p would heyguevara.com not fall into this too?
- gilsadis 10y agoThe difference is that we're a fully regulated insurance company (as opposed to brokers like Guevara or other p2p insurance startups). It means that we can control the experience end to end and build an insurance company with a different business model than how traditional insurance companies do business. This is why we can give unclaimed money back to charity.
- sharkmerry 10y agoWhy not give unclaimed money back to the consumer? Like a mutual insurance company, wouldnt that dissaude more folks from filing fraudulent* claims?
- gilsadis 10y agoNot sure it would (it doesn't really for mutuals...)
- sharkmerry 10y agoPerhaps I should've worded my question better to avoid your snark. >> This is why we can give unclaimed money back to charity. Why is charity going to prevent fraudulent claims better than money going directly back to the consumer?
- maya_lemonade 10y agoHey, this is Maya from Lemonade, we believe people are inherently good and when faced with the option of embellishing their claim and pocketing more money or claiming what they deserve and make sure their cause receives the extra money left- most people (we hope) will choose the latter.
- utternerd 10y agoI don't follow how this is P2P, and unfortunately it seems only available for New York zip codes?
- Vendan 10y agoWhy is the "For New York" below the fold?
- matiasz 10y agoOn the home page, the apostrophe in "World's" should be a curly apostrophe, not a straight single quote.
- gruez 10y ago>A transparent 20% fee to run everything how does that compare with the profit margins of a traditional insurance company?
- incongruity 10y agoVery different market but the the ACA has a Medical Loss Ratio rule that requires insurers to spend 80% of premium dollars on care and thus caps admin costs + profits at 20%. (http://kff.org/health-reform/fact-sheet/explaining-health-care-reform-medical-loss-ratio-mlr/ http://kff.org/health-reform/fact-sheet/explaining-health-ca...) I find that an interesting coincidence in this case...
- gilsadis 10y agoHealth insurance is a whole new ballgame. But let's stick to P&C, and especially homeowners and renters, whereas companies are conflicted in paying out claims, as it impacts their bottom line. When they pay you your claim, they make less profits. So they're in this conflicted situation in which they have to decide between profiting, and paying your loss. A flat 20% removes that conflict and aligns interests.
- maya_lemonade 10y agoHey Gruez, Regular insurance companies have an expense ratio of 40%.
- SmellTheGlove 10y agoIn P&C it's closer to 28%, and for most of them that means agency commissions and such. That said, I think 20% expense is a bit wishful for a startup, but I hope I'm wrong and that it works out for you. I will just assume that your 20% doesn't include LAE unless you're writing super preferred risk.
- CaveTech 10y agoFrom what I can tell P2P means it's essentially an insurance co-op. It's definitely not a world first - I had renters insurance over 10 years ago that worked this way (except I got actual dividends instead of donations in my name).
- daschreiber 10y agoDaniel from Lemonade here. Totally understand how P2P can be confusing as a term. What we mean by it is that we use each group's premiums to pay their claims, with leftover money going back to the group's common cause. To us P2P is a shorthand for: 'it's not our money'!
- propter_hoc 10y ago> What we mean by it is that we use each group's premiums to pay their claims, with leftover money going back to the group's common cause. So using pension plans as an analogy, it's more like a pay as you go pension scheme, like Social Security, than a fully funded scheme where the capital is invested and the returns from investment pay expected payouts. I guess the distinction is that since the leftover money is used to donate to causes, there's no buffer to handle any unusual payments in the scheme itself, and the scheme is insolvent immediately in any month where claims exceed payments. So any buffer has to come from the reinsurance contract, or from any equity capital invested in the entity writing the insurance contracts. Is this accurate? Really interested if you tell me a little more about how you handle risk here.
- edc117 10y agoDon't usually do this, but seconding this response because I'd really like to emphasize it and I'd love to hear some of these answers. Why not just return the extra as lower rates in the subsequent month or refunds instead of donating?
- deleted 10y ago[deleted]
- KaiserPro 10y agoDaniel: Its really not P2P though is it? What you're doing is charging a flat fee to enter into a policy which is underwritten by someone else. its not sharing, its not anything special, its just insurance with a fancy GUI.
- cheriot 10y agoI don't understand the P2P claim either, but I'll upvote anything involving Dan Ariely.
- samfisher83 10y agoIt looks like these are the companies that are really insuring you: Lloyd’s of London, Berkshire Hathaway’s National Indemnity, XL Catlin etc. Basically they are buying a policy from one of those companies adding 20% and selling it to you. A insurance company works by spreading risk over a large area. By selling everything in NY they are increasing their correlation which raises risk. One of the reasons for the sub prime crisis was no one expected housing to fall in all markets at the same time.
- h4nkoslo 10y agoThere's a difference between insurance and reinsurance. It looks like they're only reinsured through those companies, but the policy itself is underwritten by Lemonade. Reinsurance is basically insurance for the insurance co, for instance if a hurricane hits NYC and wipes out all of their policyholders at once. (It's a bit complicated because there actually are many insurance co's that only sell insurance underwritten by a third party (although they may be able to offer lower price than buying from the third party directly because of how they target their customer base or handle claims), or sell insurance strictly on commission and outsource servicing claims, and there are varying forms of reinsurance that cover everything from huge tail risks to flat percentages of claims, or exotic circumstances like your corporate HQ burning down or massive lawsuits.)
- huac 10y agoIt's funny you chose a hurricane as your scenario where an insurer needs coverage. A lot of insurance companies are issuing their own, more creative, instruments to avoid going through the reinsurance markets - especially 'catastrophe bonds,' which offer higher interest rates than normal bonds, but do not pay out in the event of a catastrophic event such as a hurricane.
- samfisher83 10y agoYou are right I guess they could be covering a majority of the claim, but I would guess their reinsurance percentage is probably a high percentage. For example if the probability of fire is 1%, but due to their limited geographical focus they were covering an entire building of 30 apartment and their coverage is 100 dollars well their rate should be 1 dollar + x%, but if their is a fire their payout will be 3000 dollars due to that correlation of all the apartments burning down. In that case the reinsurance company would have to cover that. If I were Berkshire I would have to price the policy higher for the increase risk.
- h4nkoslo 10y agoThis is wildly un-new. Mutual insurance companies have existed for literally hundreds of years. Oldest one I can find in 5 minutes dates to 1762, and if you include merchant insurance organizations, probably <1400 (although those probably end up looking more like equity arrangements). https://en.wikipedia.org/wiki/Mutual_insurance https://en.wikipedia.org/wiki/Mutual_insurance https://en.wikipedia.org/wiki/The_Equitable_Life_Assurance_Society https://en.wikipedia.org/wiki/The_Equitable_Life_Assurance_S...
- gilsadis 10y agoTrue. We like to say that Lemonade is the oldest new idea! I think that's what the sharing economy is all about, using technology to revive modes of social interaction that used to be commonplace.
- maerF0x0 10y agoThats a great way of looking at the sharing economy. Once upon a time I asked my neighbor for a cup of sugar and they obliged, if even begrudgingly. Nowadays I pay a task rabbit $35 to get me a cup of sugar.
- Idontagree 10y agoA task rabbit? Is that what you call a subordinate at your office? Am I totally missing this?
- ertttddfgdf 10y agohttps://www.taskrabbit.com/ https://www.taskrabbit.com/
- Idontagree 10y agoI had no idea... I thought it was sarcasm.
- 10y ago
- mmanfrin 10y agoSo will this P2P insurance company employ an AI with a Bot interface to help people handle their claims? Maybe they can apply some Deep Learning?
- ag56 10y agoA better -- but still not really P2P -- example of social insurance is https://wearesosure.com https://wearesosure.com (UK mobile phone only for now) With So-Sure you link up with friends and are bonused if nobody claims. Of course that means nobody links with that friend that always loses their phone, which in theory reduces their risk and pays for the bonus.
- thecosas 10y agoAssuming you guys are gathering some data off the "get a quote" form to figure out where the most interest is outside of your current market.
- avitzurel 10y agoI read some of the comments about the funnel and I set out to try it myself. There are 8 steps to get a quote 1. First and last name 2. Full address 3. question (renter/owner) 4. roomates/alarm 5. current owner of insurance? 6. Jewelry over 1000$? 7. email, birthday 8. Quote, which seems highly generic and could be done without 6 of the 7 previous steps. I can't even imagine the conversion rate from just checking it out to paying customer, it can't be too high at all (outside the founders circle). ZipCode -> Quote should be the only step. The rest should happen after you convinced me about your value. By the way, don't email thisisridiculous@gmail.com, it's not really my email.
- gilsadis 10y agoValid points all, but if you were getting insurance from the traditional companies, you'd have to answer many more questions, or alternatively, pay for coverage you don't necessarily need. Our funnel tries to get you a personalized quote in minutes, so you pay for what you need. Most of the time this will be considerably lower than traditional carriers.
- lucb1e 10y agoJust an idea: give a very general, estimated quote and refine it as people go to the next step. Then people that randomly browse are happy, and people who actually want to know their quote are happy.
- edc117 10y agoIt's a good idea, and as a random browser it'd make me happy, but people wouldn't be too thrilled if the price went up from the initial quote. Also if the initial is too high, it may scare some people off.
- lucb1e 10y agoYeah I thought of that, but did not find an immediate solution. Anyway, just an idea.
- gilsadis 10y agoHey, Gil from Lemonade here. I see quite a few p2p related comments here and I totally understand how P2P can be confusing as a term. This video can help understand the concept - https://www.youtube.com/watch?v=6U08uhV8c6Y https://www.youtube.com/watch?v=6U08uhV8c6Y. tl;dr: We use each group's premiums to pay their claims, and unclaimed money goes back to the group's common cause.
- dave_coen 10y agoI think Daniel's comment in the video that the common cause could be a local PTA helps make the point clearer.
- mastratton3 10y agoInteresting, can't enter a birthday before 1916. What if I was over 100?
- d2xdy2 10y agoHmmm. I think the interaction where it says that it is not yet available in my area and to try again with a New York address could be improved a little. Go ahead and let me enter in my information and put me in some sort of potential new location queue-- get enough people near / around me, and you can start to decide where to support next. Just a thought.
- gilsadis 10y ago@d2xdy2 great feedback. Thanks! And, added you to the queue ;)
- kateho 10y agoI have to say, I'm pretty excited by this. Mutual insurance companies have existed for a good while, but they're not easy to find. Having one that's married to great tech definitely makes me want to use it.
- joosters 10y agoHow do you know they have great tech?
- ravivyas 10y agoAren't all insurances in theory P2P? My naive understanding is that the insurance companies basically collect a lot of money from a large number on people, and then pay it out when needed? Basically, think of them as managers for the money. In addition they try to make the money work by placing bets on a lot of things and hope they make more than 1X. Not trying to poke holes, but this sounds so interesting to me. This sounds similar to syndicates on the investment side.
- nerdponx 10y agoI happen to have been looking for renters insurance recently. I signed up immediately after reading the insurance policy terms. They are about as generous as the terms offered by Liberty Mutual, but LM wanted to charge me more than 3x as much, and I had a strange and frustrating conversation with a LM agent that left a bad taste in my mouth. Charity or no charity, it's a great deal. However I made two mistakes. First, I selected personal property coverage that was probably too low. Second, I used a throwaway e-mail address to get my quote. I see no option in the app to modify either one. As I put in a support request for each item on the website, it occurred to me that I am probably screwed if anything goes wrong with my policy or claim. Yes, I am aware that there is an emergency hotline. But what happens if I'm no longer in an emergency? Insurance payouts can take a long time -- am I supposed to only ever interact with the company through a little "Help" popup on their website while I'm waiting for my check? I'm also wondering: why is the actual interface to the application only available in a mobile app? What happens if my phone is damaged? Will I be forced to call the emergency hotline for even minor administrative tasks until I get a new phone? Is it that hard in 2016 to support web and mobile simultaneously? Finally, I am sick to death of patronizing "I'm your friend" interactions with applications. The whole idea of "Maya" the robot assistant is goofy. It feels like a grown-up version of Smarterchild, and I get the same uncomfortable feeling "interacting" with Maya that I do when I'm trying to explain to a cheerful robot on the phone what I'm calling about.
- joosters 10y agoYou should probably avoid all companies who do not give their phone number and address on their websites...
- lucb1e 10y ago> if my phone is damaged? Will I be forced to call You might have a hard time doing that.
- maya_lemonade 10y agoHey nerdponx! This is Maya from Lemonade ; ) Please send us the correct email address you want us to use for your policy and we'll update it ASAP. Also- you can call Lemonade even if it's not an emergency and someone from our customer care team will answer and help you out. Hope this helps
- xerophyte12932 10y agoSo I tried out Maya and I just gotta say, great stuff! You ask for the bare minimum stuff, deduce the rest yourself, let the user play around with the numbers and give them an instant quote. Insurance is something a lot of people find intimidating and hard to approach as customers, and you have made it as simple as possible, explaining each item in an easy-to-understand way, letting the user know exactly what they signing up for, how much they are paying, and what they are getting. Impressive! Good luck to you guys.
- maya_lemonade 10y agoThanks xerophyte12932!!
- andriesm 10y agoWhy not just pay out excess money to the members? Or to non-claimers to encourage good risk behavior?
- bm371613 10y agoIf they pay claims super fast and earn no money saying "no", how, as a customer, can I be sure other customers do not make fake claims and decrease my share of leftover money? Or even make Lemonade unable to pay claims?
- ciconia 10y agoThe best form of insurance is self insurance, if you have some money on the side. Instead of paying someone to insure the risk (and get rich on top of the rent), I allocate a reasonable amount (5 figures) and put it on the side, and take the risk on myself.
- srean 10y agoI wouldn't go as far as calling it the "best" form. This can spread the risk over time-dimension of a single trajectory (i.e. your trajectory). Conventional Insurance has more space to spread the risk over: the trajectory of everyone who enlist themselves.
- phonon 10y agoI am sure that will work well if your home burns down.
- joosters 10y agoWhy does Lemonade ask its users to record a video during the claims process? The FAQ doesn't give a good answer...
- brewdad 10y agoProbably one of their "disruptions" to the current market comes from not rolling an adjuster out to your home for as many claims as possible. Send a video of your covered loss and they can evaluate your claim from anywhere in the world.
- joosters 10y agoCan an insurance company really claim, as Lemonade does, that: the Service Is Available “As Is.” YOU EXPRESSLY UNDERSTAND AND AGREE THAT: (a) YOUR USE OF THE SERVICE AND THE PURCHASE AND USE OF ANY PRODUCTS OR SERVICES ARE ALL AT YOUR SOLE RISK. THE SERVICE IS PROVIDED AND PRODUCTS ARE SOLD ON AN “AS IS” AND “AS AVAILABLE” BASIS. TO THE MAXIMUM EXTENT PERMITTED BY LAW, LEMONADE EXPRESSLY DISCLAIMS ALL WARRANTIES AND CONDITIONS OF ANY KIND, WHETHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO THE IMPLIED WARRANTIES AND CONDITIONS OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT. In other words, they are promising nothing. How then can you rely on them for insurance?
- SmellTheGlove 10y agoThat might be a cut and paste TOS, with a little CTRL-H for flavor. Otherwise, that TOS hopefully is intended to apply to the website only. If anyone has gotten far enough with them, I'd love to see their actual insurance contract. I'm too lazy to go pull their state filings. EDIT: Here's the part that troubles me more - "GIVEBACK ... our stated intention is to calculate the amount of leftover money by subtracting from the group’s collective premium, our flat fee (currently 20%), the costs of claims, a “rainy day fund” and other insurance expenses like reinsurance – and giving back what’s left (up to 40% of the group’s premiums). ... " That 20% "flat fee" is about 8% less than the industry standard expense ratio. That's pretty aggressive expense reduction, to the point where I'd wonder if they'll run out of money, or if they plan to write only the most preferred of preferred risk. I know it reads as though a "rainy day fund" and reinsurance are separate items, but a rainy day fund only happens if you run a surplus, and I'd be shocked if anyone is reinsuring this block at reasonable rates unless, again, (very) preferred risk - at which point you wouldn't want or need to reinsure. I know it sounds odd, but as a startup, I'd be happier as both a potential customer and potential employee (both very hypothetical) if they called it 30% and undershot it. You don't want to run out of money. It's not an industry where you can just fire some employees unless you're really overstaffed, since service level declines drive complaints, and enough complaints and suits put you out of business. EDIT 2: All of that said, I'm rooting for these guys. This industry needs modernization pretty bad. If they can make their 8% back from process and tech optimization, that's great. I'm not trying to be negative, I really want them to succeed.
- neximo64 10y agoWhy not give the leftovers back to customers? There's incentive in that to be a lower risk client.
- croon 10y agoThey answered this in a Techcrunch article: [1] “Our initial application to the department was to give the money back to consumers. They were not going to do it as the laws are currently drafted,” said Daniel Schreiber. They also stated they're hoping/looking to change those laws. [1] https://techcrunch.com/2016/09/21/less-exciting-than-beyonces-album-but-potentially-more-rewarding-lemonade-launches-a-new-way-to-do-insurance/ https://techcrunch.com/2016/09/21/less-exciting-than-beyonce...
- sharkmerry 10y agoBut are the limited by the sole fact that they incorporated as a benefit corporation? Mutual insurance exists in New York, so this seems like they are misleading..
- buro9 10y agoNot sure it's the first. At least, I know of https://heyguevara.com/ https://heyguevara.com/ is a P2P car insurance provider in the UK that is registered with the FSA and licensed to provide insurance products. They've been operating for a couple of years now.
- speps 10y agoInteresting but they don't allow european licences in their quote form... That's a pretty big oversight in my opinion. However, those options are hilarious : http://imgur.com/a/r0aar http://imgur.com/a/r0aar
- zodPod 10y agoHonestly having to give the page all of my information before even being able to see a price or actually really even find out what it was selling turned me off. Didn't bother finishing.
- insurance_gal 10y agoIf anyone wants to see exactly what goes into an insurance product, it's public info (including loss ratios.) In this case, you can look up the public filing at https://filingaccess.serff.com/sfa/home/NY https://filingaccess.serff.com/sfa/home/NY (search for Lemonade as the company) or here is a public dropbox folder. https://www.dropbox.com/sh/dc6daybikir92l1/AAAWWT6J0DfsPG7nAnI-ks6Xa?dl=0 https://www.dropbox.com/sh/dc6daybikir92l1/AAAWWT6J0DfsPG7nA... of it Expected Loss ratio is 50%. Pricing structure is pretty standard.
- aerialfish 10y agoAre you guys getting a tax write off for the charitable donations from the surplus pool? If so, wouldn't that give Lemonade a financial incentive to decline payouts in favor increasing your bottom line and therefore negate the idea of having no stake in paying out legitimate claims?