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Building Payments for an Insurance Startup

133 points by saarons 7y ago

rubyfan 7y ago
I'm honestly surprised that Know Your Customer (KYC) and OFAC regulation aren't mentioned with respect to Claims. Besides solving for PCI complexity on the front end of payments, Stripe has a solution for both of these things issues on outward payments. Stripe is used by both Hippo, Lemonade and a few other more established insurance companies.
BillinghamJ 7y ago
Stripe Connect makes all of this stuff veeeeery easy. No need to test up trust/FBO bank accounts/etc. for client money - just allocate money to accounts held in the name of the correct parties. Source: built a fairly large insurance company with zero client money accounts by using Stripe Connect Disclosure - we are locked into processing card payments with Stripe only, but have no incentive to say nice things about them
- raphaeljlps 7y ago
  just to clarify the last part: but have no incentive to say nice things about them. with this you mean you don't get money from them to promote them. Please correct me if I'm wrong.
  - BillinghamJ 7y ago
    It means no incentive of any kind - monetary or otherwise
stevekrouse 7y ago
Why do you use integers to represent monetary values? It seems like $600 is represented as 60000. Or is that a typo?
- juskrey 7y ago
  Dunno why you guys are so married with integers.. With even slightest increase of financial process complexity, only BigDecimal or such works. With explicit exceptions when math is done without predefined rounding rules and no catastrophes when some money orders start to come in 1/100 of previously relevant units
- kyrra 7y ago
  At Google Payments we tend to operate in micros. It makes it so we never have to worry about floats. https://developers.google.com/standard-payments/reference/glossary#micros https://developers.google.com/standard-payments/reference/gl...
- npo9 7y ago
  By using integers they can avoid a person rounding off fractions of pennies and putting it into their own bank account. Really, it’s about rounding and floating point math.
- alehul 7y ago
  Across major payment processors and subscription management systems like Stripe and through most of the stack, integers are used to represent how much to charge in the smallest currency unit. [1] With that said, it's better not to reinvent the wheel here and follow the flow, and it's also the safer option— it's better to charge a customer $10 when you meant to charge them $1000, than it is to charge them $1000 when you meant to charge them $10. [1] https://stripe.com/docs/api/charges/object#charge_object-amount https://stripe.com/docs/api/charges/object#charge_object-amo...
  - tyre 7y ago
    this isn't re-inventing the wheel. This is how money is safely represented because floating point math is inexact. You end up with cases where the transaction is off ±1¢ (at least)
- cbcoutinho 7y ago
  Using floats to store monetary data is considered 'a very bad idea' in the financial world. Mostly due to how floating point numbers are rounded up/down based on the precision. https://stackoverflow.com/a/3730040/5536001 https://stackoverflow.com/a/3730040/5536001
avip 7y ago
For the record, lemonade and hippo both use stripe.
lumengxi 7y ago
This is a great read from Modern Treasury. One thing highlighted in this article that the industries not always talk about, is the concept of "Payment Ops". This is critical in FinServ organizations from my own experience. Any good and reliable payments infra is a function of technology, people, and process, and you need good tooling to streamline the whole workflow that involves engineering, finance, credit and compliance teams. Integrating with a payments API is only half of the definition of done.
- HillRat 7y ago
  One thing they don’t get into, but which becomes a significant pain, is what happens if history is wrong — for example, a policy is mis-entered and you need to adjust past financials. I architected precisely one insurance finance system, and trying to recall the data model and logic for overlapping timelines (what was, what should have been, what we thought it was...) still breaks my brain.
phonon 7y ago
> Insurance firms sometimes cover extremely “long-tail” risks, such as alien abduction insurance. That's not what "long tail" means in insurance. It does not mean unlikely, it means the claim might need to be paid out years after the period coverage was paid for. (Think current lawsuits about asbestos exposure from the 1970s). https://www.investopedia.com/terms/l/longtail-liability.asp https://www.investopedia.com/terms/l/longtail-liability.asp
- devnulloverflow 7y ago
  Well, maybe the aliens will keep returning to earth and at unpredictable intervals demanding money in exchange for keeping the hostage alive.
- nradov 7y ago
  The alien abduction insurance was clearly described as a gag gift.
  - phonon 7y ago
    That's a secondary issue (the writer (CEO?) tried to give an example of a insurance policy that covers a very remote event). So fine, doubly nonsensical. I would have also done a separate article separating paying premiums to the carrier from the carrier paying out claims. Those are basically two totally different parts of the insurance company, with different systems (usually) and definitely from different bank accounts.

133 points by saarons 7y ago

I'm honestly surprised that Know Your Customer (KYC) and OFAC regulation aren't mentioned with respect to Claims. Besides solving for PCI complexity on the front end of payments, Stripe has a solution for both of these things issues on outward payments. Stripe is used by both Hippo, Lemonade and a few other more established insurance companies.

BillinghamJ 7y ago

Stripe Connect makes all of this stuff veeeeery easy. No need to test up trust/FBO bank accounts/etc. for client money - just allocate money to accounts held in the name of the correct parties. Source: built a fairly large insurance company with zero client money accounts by using Stripe Connect Disclosure - we are locked into processing card payments with Stripe only, but have no incentive to say nice things about them

raphaeljlps 7y ago
just to clarify the last part: but have no incentive to say nice things about them. with this you mean you don't get money from them to promote them. Please correct me if I'm wrong.
- BillinghamJ 7y ago
  It means no incentive of any kind - monetary or otherwise

stevekrouse 7y ago

Why do you use integers to represent monetary values? It seems like $600 is represented as 60000. Or is that a typo?

juskrey 7y ago
Dunno why you guys are so married with integers.. With even slightest increase of financial process complexity, only BigDecimal or such works. With explicit exceptions when math is done without predefined rounding rules and no catastrophes when some money orders start to come in 1/100 of previously relevant units
kyrra 7y ago
At Google Payments we tend to operate in micros. It makes it so we never have to worry about floats. https://developers.google.com/standard-payments/reference/glossary#micros https://developers.google.com/standard-payments/reference/gl...
npo9 7y ago
By using integers they can avoid a person rounding off fractions of pennies and putting it into their own bank account. Really, it’s about rounding and floating point math.
alehul 7y ago
Across major payment processors and subscription management systems like Stripe and through most of the stack, integers are used to represent how much to charge in the smallest currency unit. [1] With that said, it's better not to reinvent the wheel here and follow the flow, and it's also the safer option— it's better to charge a customer $10 when you meant to charge them $1000, than it is to charge them $1000 when you meant to charge them $10. [1] https://stripe.com/docs/api/charges/object#charge_object-amount https://stripe.com/docs/api/charges/object#charge_object-amo...
- tyre 7y ago
  this isn't re-inventing the wheel. This is how money is safely represented because floating point math is inexact. You end up with cases where the transaction is off ±1¢ (at least)
cbcoutinho 7y ago
Using floats to store monetary data is considered 'a very bad idea' in the financial world. Mostly due to how floating point numbers are rounded up/down based on the precision. https://stackoverflow.com/a/3730040/5536001 https://stackoverflow.com/a/3730040/5536001

avip 7y ago

For the record, lemonade and hippo both use stripe.

lumengxi 7y ago

This is a great read from Modern Treasury. One thing highlighted in this article that the industries not always talk about, is the concept of "Payment Ops". This is critical in FinServ organizations from my own experience. Any good and reliable payments infra is a function of technology, people, and process, and you need good tooling to streamline the whole workflow that involves engineering, finance, credit and compliance teams. Integrating with a payments API is only half of the definition of done.

HillRat 7y ago
One thing they don’t get into, but which becomes a significant pain, is what happens if history is wrong — for example, a policy is mis-entered and you need to adjust past financials. I architected precisely one insurance finance system, and trying to recall the data model and logic for overlapping timelines (what was, what should have been, what we thought it was...) still breaks my brain.

phonon 7y ago

> Insurance firms sometimes cover extremely “long-tail” risks, such as alien abduction insurance. That's not what "long tail" means in insurance. It does not mean unlikely, it means the claim might need to be paid out years after the period coverage was paid for. (Think current lawsuits about asbestos exposure from the 1970s). https://www.investopedia.com/terms/l/longtail-liability.asp https://www.investopedia.com/terms/l/longtail-liability.asp

devnulloverflow 7y ago
Well, maybe the aliens will keep returning to earth and at unpredictable intervals demanding money in exchange for keeping the hostage alive.
nradov 7y ago
The alien abduction insurance was clearly described as a gag gift.
- phonon 7y ago
  That's a secondary issue (the writer (CEO?) tried to give an example of a insurance policy that covers a very remote event). So fine, doubly nonsensical. I would have also done a separate article separating paying premiums to the carrier from the carrier paying out claims. Those are basically two totally different parts of the insurance company, with different systems (usually) and definitely from different bank accounts.