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Saving 80% in 90 Seconds?

• sebleon 10y ago
  this is actually pretty interesting, thanks for sharing. didn't realize that upfront CAC represented the lion's share of E[cost] in renter's insurance...
• ma2rten 10y ago
  Doesn't Geico do the same? They also offer renter's insurance next to car insurance. Also what does using AI mean exactly?
• drglitch 10y ago
  Why is the title here mention AI if the post itself has absolutely no mention of it? This is basically blatant advertisement for lemonade. Geico, Metlife, and others offer very competitive rates for renters insurance (<$80/year) in major metro areas and have done so for several years
  • fernly 10y ago
    It's actually there in the penultimate paragraph: "So how can Lemonade be 80% cheaper? You guessed it: by building an insurance company, from the ground up, powered by A.I. and behavioral economics."
  • majormajor 10y ago
    I have similar questions after seeing the example monthly rates they give for the competition. I've never in my life paid that much for renter's insurance, it's always been around ~100/year. Progressive and Geico (reselling Travelers), mainly. So I just kinda assume it doesn't apply to me, or are best-case edge scenarios where they judge risk of certain customers dramatically differently. But it certainly can't be "legacy insurers have enormous overheads, making a $60 product ($5/month) impossible" as a unique advantage, since I pay $75 a year today. (And it does cover property damage liability, not simply personal property, something they seem to indicate their own does not: "Renters insurance covers personal property, rather than real-estate." Maybe they mean renters policies usually carry less property coverage, like $100K instead of full value of the property, I don't know, but it's just another weird thing in a weird-reading sales pitch that doesn't seem to apply to the world I've been living in.)
    • cosmie 10y ago
      Is your policy a standalone policy or bundled with another policy, where the marginal overhead of the renters policy is lower? Also, the $100k liability coverage you're referring to is more likely than not personal liability coverage, not property damage liability. The intent of that is to cover any claims resulting from e.g. one of your guests getting hurt on the property. Not to cover structural claims themselves. Most of the rentals I've lived in require that coverage, as it makes their premiums cheaper since their liability coverage acts as an umbrella policy that only triggers after that $100k is exhausted from your policy. But any structural claims that don't include personal property or liability issues would still go straight to their policy, not yours.
    • phonon 10y ago
      You are not covered for property damage with a renter's insurance policy. The $100,000 coverage is for liability (e.g. a guest slips and falls and she's you.) You are also covered by a smaller amount (e.g. $10,000) for your personal property.
      • phonon 10y ago
        "and she's you" -> and she sues you
  • Spooky23 10y ago
    I was a sucker who converted. In my case, as a homeowner, they were nearly 20% more expensive than my current carrier homeowners and umbrella liability. So either their underwriting model is crap, their data sucks (I literaly live next door to a paid firehouse and got 3* for fire protection). They also don't ask you detailed questions unless you explicitly do so -- in my case that was nearly a $100 difference. Last time I bought renters insurance, in 2006, it was something like $35. Their interview approach to data gathering is slick though!
  • Hydraulix989 10y ago
    They just changed their title to "Saving 80% in 90 Seconds?" after getting a bunch of upvotes from the previous AI-powered insurance title. Talk about manipulative and disingenuous behavior. I flagged the post.
• djyaz1200 10y ago
  Interesting. Seems like the insurance industry will change dramatically with the introduction of more data and AI capabilities. Imagine if an insurer ran a search of social check ins at bars against their auto insurance customers. Seems like some people might be paying $2K/mo for car insurance while others pay $40/mo... since with more analysis it will become a lot easier to determine when those big loses are coming and exactly who from rather than guessing/averaging like they do now.
  • lucaspiller 10y ago
    Until they decide that as you don't have an active social profile you are a 'high risk' client :-)
    • mee_too 10y ago
      That until won't last long. I know for a fact FB was negotiating last year with a few big insurance companies. Many individual metrics correlated to insurance risk are already available to FB customers, but the FB standard terms limit their use currently.
  • AnthonyMouse 10y ago
    > since with more analysis it will become a lot easier to determine when those big loses are coming and exactly who from rather than guessing/averaging like they do now. This is kind of going to break insurance. When you create more risk pools, you increase the number of low risk people and decrease the number of high risk people who buy insurance. But it isn't clear that having more uninsured high risk people is a societal win -- especially if it means replacing insurance claims with bankruptcies. Meanwhile "more [low risk] people with insurance" is not an unmitigated good, because people will buy things when the insurance is paying for it that they wouldn't when paying out of pocket, which significantly increases costs. And it's easy not to have much sympathy for Those Dirty Drunks About To Get What They Deserve, but it's really the person the drunk hits who suffers when the drunk was driving without insurance because it was prohibitively expensive. Or the hospital who has to treat a bankrupt patient with no medical insurance. And being high risk isn't always a result of some moral failing on your part. Doing genetic testing for medical conditions would certainly allow people without high risk markers to pay less for insurance, but what happens to the people who have them? In the limit where the predictions become extremely accurate there is no point in even having insurance because your net lifetime insurance premiums will be so close to your net lifetime insurance claims that the only thing the insurance company is providing you with is overhead. But if any insurance companies do this then it doesn't even matter whether all of them do, because the ones who do will get all the low risk customers and the other insurers will de facto end up with a high risk pool with high premiums. So we really need to decide if we actually want this as a matter of legislation.
• cylinder 10y ago
  What does AI have to do with anything?
  • brandon272 10y ago
    AI is becoming a marketing buzzword. All software that do anything remotely clever or interesting is being presented as "AI" helping you solve business goals.
• allengeorge 10y ago
  So...stats (the same, I presume that a normal insurance company uses) and an online-only, agent-free model?
• melvinmt 10y ago
  > So how can Lemonade be 80% cheaper? Well, it's just sugar, lemon, and water...
• nedwin 10y ago
  Great marketing until you realise there are no links to their product or home page anywhere on this page.
• guiomie 10y ago
  Doesnt work in SF ... anyone knows why?
  • phonon 10y ago
    Only filed and approved in NY so far.
• reiderrider 10y ago
  There are a lot of smart people working in competitive insurance markets. To think AI or Lemonade can drastically reduce the cost of an intangible product is naive. Most of the cost in insurance is insuring the risk opposed to admin.
  • wtvanhest 10y ago
    I have to agree with this comment. Insurance companies are highly sophisticated math machines. They are not sitting around with some majorly outdated process. This is a highly competitive market. The most likely scenerio is that new enterants will do one of 3 things: overprice insurance, underprice insurance, something illegal like discriminating
  • virmundi 10y ago
    I am curious if they are going to make an AI hedge fund. This is how insurance companies make money. If they can create money without having to pay traders and analysts, it just might work.
    • drglitch 10y ago
      Insurance companies are _not_ hedge funds. They are also typically quite low margin, volume business. Further, in more common products such as life ins policies, the risk models are pretty heavily regulated on state/federal level. Insurance companies make money on fees and on "using" the cash you're paying (upfront due to amortized payments) for your policies by making low- to mid- risk investments in various - typically low-liquidity - assets. (Source: I create risk management systems for insurance companies)
      • virmundi 10y ago
        Fair enough. What I meant is that they will shovel funds into the markets in order to actually make money. The best way to do this is to have a higher risk approach plus no human traders.
        • 10y ago
• siliconc0w 10y ago
  I had state farm (auto) for a few years and at some point their algorithm just decided to screw me more than doubling my premium. My agent couldn't explain it so I just had to switch providers. Even this is basically a submarine for lemonade it'd be interesting to know how many insurers are using Machine learning and if not why not.
  • toomuchtodo 10y ago
    I've always wondered if there was a market for a startup like Credit Karma for car/renters/homeowner's insurance. Instead of checking for cheaper rates at policy expiration, the broker startup would check constantly (daily? weekly?) across as many insurers as possible, and automatically have a new policy written for you if it was able to find another policy matching your existing coverage at a lower price.
    • pkaye 10y ago
      Why would the rates change so often? I thought they are based on some risk profiles that don't change that quickly.
  • Spooky23 10y ago
    They did you a favor, State Farm sucks at claim payment. Different insurers have different underwriting models. When I was a dumb kid, Progressive was the best deal, they sucked once I got married. If you have a good record/credit, you should get Amica, USAA or Erie, period.
• dboreham 10y ago
  But...aren't these various use cases for Neural Networks that impact regular people's lives in a significant way sooner or later going to have to show how they come up with a particular decision? And won't that be hard to do?
  • dilemma 10y ago
    Yes. AI is the marketing name for complex algorithms that nobody really know how they work or why they do what they do. This will ruin countless lives.
    • nerdponx 10y ago
      What? no. "AI" is the marketing name for "machine learning, now with 100% more chat bots". Most "machine learning" is not "complex algorithms". It's mostly just support vector machines, clustering algorithms, and some off-the-shelf neural networks whose behavior is well understood. Whether that's the case here isn't clear, but a project like DeepMind is not representative of AI in the wild. If it does somehow manage to ruin countless lives, it won't be because of AI. I don't think AI did anything at all for me when I signed up; I didn't even use a chatbot, I just answered the same questions I answered on every other insurance quote, and happened to get a better price with sweeter terms than I got at any other insurer. It also didn't do anything for me when I filed a claim: they have a clearly-defined policy like any other insurer, and I worked directly with a (human) agent to get my claim resolved. The AI stuff is a marketing gimmick. If it ruins any lives at all, it'll be because the company is selling insurance for a fixed, below-market rate. But Dan Ariely isn't stupid, and I assume they'll at least be able to honor their existing contracts in the event of some kind of widespread catastrophe.
  • Houshalter 10y ago
    You can look at the gradients into the neural network and see what features are changing the output and by how much. This approach is called LIME, see https://github.com/marcotcr/lime https://github.com/marcotcr/lime
• deepnotderp 10y ago
  I'm sure no one in the insurance industry has thought of using AI....
• ridiculous_fish 10y ago
  "Prototaph" by Keith Laumer is a short story with this premise. All the computers refuse to insure a man, so he goes on a quest to figure out why. It's a fun read and incredibly prescient, published in 1966! It's available online legally: http://hell.pl/szymon/Baen/The%20Baltic%20War/The%20Lighter%20Side/0743435370__21.htm http://hell.pl/szymon/Baen/The%20Baltic%20War/The%20Lighter%...
  • FeepingCreature 10y ago
    Isn't that the wrong way around? An arbitrary life insurance on this man should be available for a price of 0, since there is zero risk of ever having to pay out.
    • josephagoss 10y ago
      I suppose it's almost like a null return, something that can't be computed when the only expected outputs are positive non-zero numbers.
  • CamelCaseName 10y ago
    What a great read! The language is a bit bumpy at times, but it was published over 50 years ago. What does 'BB' mean?
    • Terr_ 10y ago
      There's an English idiom "sweating bullets" [0] which refers to a state of panic or dread, possibly with the image that droplets of sweat are being forced out at speed. I believe the author is replacing "bullets" with "BBs" [1] to fit the youthful 21-year-old protagonist. BBs are a much tamer kind of spherical projectile popularized by a variety of teen-toys. The actual origin of "BB" goes back to serious guns again, as a defined size of metal buckshot pellets. [0] https://en.wiktionary.org/wiki/sweat_bullets https://en.wiktionary.org/wiki/sweat_bullets [1] https://en.wikipedia.org/wiki/BB_gun https://en.wikipedia.org/wiki/BB_gun
      • 10y ago
• phonon 10y ago
  They've sold less than $100,000 worth of renter's insurance, after spending millions of dollars pre and post launch. Their reinsurance costs are almost as much as their premiums, and they haven't dealt with any large claims yet. Frankly, they have no idea what their overhead and acquisition costs will be if and when they sell a material number of policies. As far as I know, they use standard ISO loss tables with a 50% claims cost expectation. Even if that pans out, you need to sell a heck of a lot of $60 policies to even cover what they've spent to date.
• RadarAI 10y ago
  ;)
• surferninja 10y ago
  A lot of commenters are speculating as to AI analyzing the risk, which, as they also point out, isn't necessarily a new idea. However, if I interpret the article correctly: >Indeed it has so been achieved. It is available 24/7, courtesy of a delightful bot who will fashion you a $5 policy in 90 seconds and with zero paperwork. Between this and the comments about acquisition costs, it seems like they're saving a lot compared to traditional (legacy) insurance companies by cutting out customer service reps and agents.
  • nerdponx 10y ago
    I'm a happy Lemonade customer. I signed up because a) the policy was dirt cheap, and b) the policy agreement was clear and also quite generous. It was not AI-generated: it's just a PDF like every other insurance policy agreement. And the policy was only so cheap because they let you take out a policy with a lower coverage limit than you would normally be able to find from a traditional insurer. Moreover, I didn't get pushy sales calls after getting a quote (Liberty Mutual was particularly offensive in this regard). I was skeptical, then my phone got stolen. I reached right out to their "emergency hotline" and told them what happened. After some initial confusion I got to work directly with a customer service rep who basically bent over backwards to ensure that I was satisfied. It didn't seem like a terribly sustainable way to do things, and I wouldn't expect that kind of service once they start to grow, but it worked out great for me and I sure as heck got my money's worth in coverage.
• kristianp 10y ago
  Mods / Dang, the actual title is "Saving 80% in 90 Seconds?" "When Tech Makes Insurance 5x Cheaper", The tldr is: "our acquisition costs are already 10x lower than legacy carriers."
  • dang 10y ago
    Ok, we reverted the title. Submitted title was "A “killer business model”: AI in the insurance industry". Submitters: please use the original title except when it is misleading or linkbait – that's in https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html.
• rent_seeker 10y ago
  I work in property insurance, and I'm curious as to how lemonade got their product past state regulators if it's truly some whiz-bang AI or machine learning stuff driving their model. Most states want to be able to review and understand filings, and a black box isn't conducive to that. Maybe they're using it for feature selection? Edit: Found one of their filings on SERFF public filing access. Lookup WESA-130711665 on https://filingaccess.serff.com/sfa/home/NY https://filingaccess.serff.com/sfa/home/NY if you're interested. 'Rate Support.pdf' has the meat. It doesn't look like anything special, honestly. They admit most of it is copied from the largest insurers in the state, and they use a proprietary credit model from Transunion. This makes sense given that they don't have any data to train it on since they're, you know, new.
  • phonon 10y ago
    The AI stuff they are claiming is to reduce their LAE. (Claimbot type stuff.) Their rates (and forms) are nothing special--ISO rates + Transunion score. The only thing unusual in their pricing is they allow you to choose low coverage amounts + don't charge installment or credit card fees. So you can buy a decent policy at $5 a month. I am skeptical that will ever be net profitable though....
• neoterics 10y ago
  I work in the insurance industry and for them to extrapolate the average customer acquisition cost for car insurance to a renters customer is actually pretty laughable.