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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 na

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 They are not sitting around with some majorly outdated process.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.
    - Spooky23 10y ago
      That sure sounded great to the people running AIG in 2006!
      - virmundi 10y ago
        We've come a long way in 10 years. This company was recently discussed on HN https://www.bloomberg.com/news/articles/2017-02-06/silicon-valley-hedge-fund-takes-on-wall-street-with-ai-trader https://www.bloomberg.com/news/articles/2017-02-06/silicon-v...

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 They are not sitting around with some majorly outdated process.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.
  - Spooky23 10y ago
    That sure sounded great to the people running AIG in 2006!
    - virmundi 10y ago
      We've come a long way in 10 years. This company was recently discussed on HN https://www.bloomberg.com/news/articles/2017-02-06/silicon-valley-hedge-fund-takes-on-wall-street-with-ai-trader https://www.bloomberg.com/news/articles/2017-02-06/silicon-v...