16 ms·
Lemonade files S1
- fataliss 6y agoWonder if that is related at all in timing with their pet insurance offering coming out soon!
- afwaller 6y agoYou only make insurance cheaper by charging risky people more. Right now it is mostly laws that protect categories of people that keep insurance companies from charging people more. What’s the plan here, use machine learning in a “hands off” way with a black box algorithm to apply pricing discrimination in a way that a human could not because of regulation?
- hkai 6y agoOne interesting approach would be to actually charge less risky people less, and "safe" people more, as a way to equalize various groups in the society. Once this has enough traction, doing it the other way round could be even stigmatized.
- hellomyguys 6y agoNot disagreeing that is part of the strategy, but also it is worth thinking how much overhead there is in the insurance industry. How many offices are there nationwide? How many of the jobs are essentially basic data ingestion? Approving of claims? How much is spent on advertising? Probably a fair amount of fat to trim.
- erichurkman 6y agoDoes anyone know what an insurance agent makes? If I go to my local State Farm office to get a home owners policy, what is the cut that goes to the local office/agent?
- gen220 6y agoIt's generally quite low, but it depends on a large number of factors, and varies a lot market to market. It's generally a couple percentage points of your monthly premium, per month. An agent generally needs a couple hundred paying policies to be in the black.
- dmurray 6y agoYou can make a guess based on rent and salaries. Those aren't amazing businesses, probably the median one nets a few grand per month.
- aianus 6y ago$800 commission for a $50/mo life insurance policy. You have to pay the commission back if they cancel within a year. Can’t really offer a source but I heard it from an insurance broker personally.
- phonon 6y ago10% or so to the agent. Everyone makes money on the renewals (your "book").
- twic 6y agoHard to put together VC-sized returns out of trimmed fat.
- adventured 6y ago> Hard to put together VC-sized returns out of trimmed fat. That depends on how large the industry is, what its cost structures look like and how price sensitive it is. A small, persistent cost advantage can be enormous in the insurance industry. You're also saying that in a thread about a company that just produced VC-sized returns and is IPO'ing. Your premise clearly doesn't follow, as most VCs invest early and will exit with an IPO like this. The primary question going forward with Lemonade is for public shareholders and whether the company can get a lot bigger in the future. The VC-sized returns were already generated for the early VCs.
- deleted 6y ago[deleted]
- canjoe 6y agoInsurance can be cheaper if the customers lower their average risk burden. Lemonade tries to explain this, but not clearly: “We seek to encourage good behavior and build a long-term relationship based on mutual trust by endeavoring to decouple our financial incentives from variability in claims. In our model, we minimize any incentive to deny legitimate claims as we aim to give back, rather than pocket, leftover monies. After our customers purchase a policy, we ask them to designate a charitable cause for us to support with the residual premiums from their policy. Despite there being no contractual obligation requiring us to donate leftover premiums to nonprofits, when a customer embellishes a claim, such customer reduces the total amount available that can be contributed to nonprofits. As a result, we believe customers are less inclined to embellish claims as they would be hurting a nonprofit they care about, rather than an insurance company they do not.”
- ianai 6y agoSounds like they’re trying to use an external source of altruism to reinforce altruism from their customers.
- deleted 6y ago[deleted]
- forgotmyp77 6y agoi think the name for that is hostage?
- whyhow 6y agoOr you could lower overhead by cutting costs, hiring less people, changing commission structures. The nicest business meal I ever had was during a lunch meeting that I tagged along to with a large insurance carrier. They could probably cut out $30 steak lunches to lower costs too.
- gen220 6y agoAt most big old and public insurance companies, claims payable represents a significant chunk of expenses, but not even close to 100% (it's closer to 60-70%). The rest is, generally, "administration" (humans processing papers, and managing humans processing papers, in cushy offices). This is where better technology can result in lower costs. It's a volume/unit-cost game. Their unit cost per person is maybe a few cents or a few dollars cheaper, but at huge volumes it makes a big difference.
- ddevault 6y agoIn addition to increasing efficiency, another way that comes to mind is to lower risk for the population as a whole. For example, investing in safer building codes, local emergency services, mass transit, etc.
- gen220 6y agoYep! One way that insurance compmanies can achieve this is by providing members of their insured population access to services that reduce their individualized risk. Pre-COVID, many health insurance companies (my industry) were gearing up to offer free Doctor on Call (a service that, if well-implemented from a tech PoV, has near-zero margin costs), because access to such a program reduces the risk of expensive claims later down the line. I'm sure there are equivalents in the kind of insurance that Lemonade provides. For example, they might offer free or heavily subsidized home security installation in certain zip codes with a history of burglaries.
- chimeracoder 6y ago> At most big old and public insurance companies, claims payable represents a significant chunk of expenses, but not even close to 100% (it's closer to 60-70%). By law, it's required to be at least 80%.
- nostromo 6y agoWhich creates a perverse incentive for insurers not to care about payouts (If you want to increase profits, you have to increase payouts) -- so long as they can compete on costs with other insurers.
- winrid 6y agoOr not taking on risky customers...
- deeg 6y agoI'm tangentially involved in the insurance space and I believe Lemonade is trying to use machine learning to process claims because: - Processing claims with humans is expensive; every step that can be accomplished by a computer will probably be cheaper. - A claim processed via ML will probably be handled fast. A fast response = happy customer, which helps with retention. This is a big one. - A claim that is processed and closed quickly is harder to amend. Some customers slowly realize that adding items to a claim is free money. Others (legitimately) forgot items and want to add them. A quick claim is usually cheaper than one that might take a few days (or weeks) to process. - Younger generations are more used to working with a web pages and will likely look at humans (e.g. agents) as old-fashioned. The big carriers are both scared and dubious of Lemonade. If Lemonade can somehow make it work they could do serious damage to the carriers. But it's hard to see how they'll make the numbers work, as their current losses show. Most of the carriers are trying to implement something similar (which is where I'm slightly involved).
- ianai 6y agoIt also seems they may see this filing as a way to reinforce their marketing as a “good” company that directs funds where they say they do. I could imagine them telling their customers to buy their stock as a way to be involved with how they operate.
- toomuchtodo 6y agoWhat happens when regulators require disclosure of claim handling ML models, as they already regulate insurance rates?
- watchyourML 6y agoRegulators are starting to lean in on ML rules and requirements. They can't hire data science experts to keep up with competitive demand and salaries, so they are going to require companies to make their ML-based outcomes accessible/auditable. Claims, pricing, risk modeling, underwriting - we're in the early days of companies using ML for these tasks.
- kansface 6y ago> apply pricing discrimination in a way that a human could not because of regulation? I've read several anecdotes of people hard coding hacks into black box algorithms which end up being discriminatory even when stuff like race is not a direct input. I do not think the law cares how discrimination is arrived at.
- hobofan 6y agoThat's true, and AFAIK know due to this, insurances that are bound to those regulation don't touch black box ML with a 10 foot pole. When we were pitching ideas to an insurance company ~5 years ago they basically said "If it's not human-explainable we can't use it".
- deleted 6y ago[deleted]
- hogFeast 6y agoYou don't. The point is to charge based on risk. There is no sense in which you can transfer gains from one set of customers to somewhere else. The profitability of any group of customers depends only on the price you charge them. And btw, lots of insurers specialise in pricing high-risk customers. If another insurer comes in and tries to subsidise low-risk customers using high-risk customers, then a specialist insurer just comes in and undercuts them profitably. Even a low-risk customer becomes a bad risk at the wrong price. It is all about the price.
- tharne 6y ago> Right now it is mostly laws that protect categories of people that keep insurance companies from charging people more. Those laws don't really do anything. You can just use zip code and credit score, and bob's your uncle.
- KingMachiavelli 6y agoIn my case Lemonade was by far the cheapest option for renters insurance - even cheaper than bundeling with my auto insurance. Glad to see the company is doing well. I suppose it's greatest risk is incumbents offering more aggressive bundle pricing. So It'd be interesting to see if Lemonade could expand into the auto insurance sphere. Actually from the S1: > in February 2020, we announced our intention to launch pet insurance, and we may in the future choose to enter, as underwriter or as agent, into additional vertical markets, such as auto and life insurance, in order to achieve our long-term growth goals. It sounds like they will enter other insurance markets provided the regulations aren't too costly.
- stevehawk 6y agoyou say "doing well" but their filing says "we lose money annually".
- deleted 6y ago[deleted]
- servercobra 6y agoThey were cheaper for me until I realized they don't cover earthquakes, and then they became much more expensive than bundling with USAA sadly. I'd definitely be interested in them for most types of insurances though. They're super easy to use and importantly, super easy to cancel.
- bcrosby95 6y agoI don't know how it is for renters, but you can't find a standard homeowners insurance that will cover earthquakes, at least not in California. This occurred after the damages and insurance claims from the Northridge earthquake. You have to buy earthquake insurance through a state program that the insurance company may offer - but it isn't really from the company, its from the state. In general, they are extremely high deductible programs and only for catastrophic loss - e.g. deductibles that are 25% of the structure.
- 6y ago
- TheSwordsman 6y agoThis is honestly the first I'd ever heard of their company; interesting! Only thing that would keep me from jumping is lack of auto insurance as well, but I understand NOT being in to that business. I hope they do well.
- hammock 6y agoYou really only would have heard of them of you got served an ad by them. They do a lot of digital marketing. You must not be in their target demo. Not knowing who you are, may I ask why you think that is?
- coldpie 6y agoI'm always blown away when I encounter someone who browses the web without an ad blocker. There's a better way, man!
- mywittyname 6y agoThey advertise heavily on YouTube and not every device has ad blocking capabilities.
- 0xffff2 6y agoNot GP, but I'd never heard of them either. About the only place I ever see ads anymore is the embedded overlay ads on hockey games (back when sports were a thing). I've managed to block pretty much every other form of ad online, so it doesn't much matter what their target demo is.
- deleted 6y ago[deleted]
- richardwhiuk 6y agoIt's difficult to see why this is a good investment. They've made a net loss for every year in operation - although granted that loss is shrinking. This isn't a tech business - it's an insurance business that uses some tech. There's no network effect, and they are operating in a price sensitive market.
- gen220 6y agoInsurance is a very different business model from tech business models. Losses that are single-digit percentages of revenue are not bad, especially for a company that's investing in growth. Shrinking loss while growing actually shows that they have very good traction. Price sensitivity can be a good thing for a competitor, and tech actually does help their business (see my cousin comments in this thread). I work in insurance tech, but not for Lemonade or anyone affiliated with them.
- bsamuels 6y agohow do you tell the difference between investing in growth and poor underwriting discipline in such a young company?
- gen220 6y agoIt's a good and fair question, and it's one you can answer by looking at their loss ratio trajectory. You expect to see it really high in the beginning (while they're learning how underwriting works), and to logarithmically decline over time, tending to plateau somewhere reasonable. That's what their loss ratio trajectory looks like, so far.
- deleted 6y ago[deleted]
- derision 6y agoIf you're considering organic growth of a component of network effect, they definitely do have that. I used Lemonade and had a great experience, including a claim, and recommended it to a dozen of my friends who signed up as well
- elpakal 6y agolooking forward to hearing what Scott Galloway has to say about this
- xfour 6y agoIn parallel to this growth of topline and increasing efficiencies, our gross loss ratio declined steadily from 161% in 2017, to 113% in 2018, to 79% in 2019 and to 72% for the three months ended March 31, 2020. See "Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Operating and Financial Metrics." Seems like a struggle to get to profitability. With the ratio of closing the gap slowing, sure looks like it's getting harder. This is what bugs me about these companies, after years of running the business and doing 1 Billion in revenue it's still a coin flip whether they will ever be profitable. How is this any different from the first "Internet Boom" except that they've been floated to a much bigger revenue number by VC losses. So now the VCs want return on investment. The public is getting a chance to buy, and some will, and the VCs make out, the founders probably already did by selling to the VCs, but where is the value creation? Just a shell game.
- jgalt212 6y agoThanks the Fed's policy of Leave No Investor behind, the NASDAQ is +10% on the year. So many of the deals will get done, somewhat irrespective of L/T, M/T profitability. Investors have too much cash and no where good to put it.
- im_down_w_otp 6y ago> "the founders probably already did by selling to the VCs" That is the opposite of how that works, FWIW. Unless the founders took VC money to pay themselves multi-million Dollar salaries or something?
- rcar 6y agoFounders often get the opportunity to cash out some of their stake in the company in mid and late VC rounds.
- relaunched 6y agoIt's fairly common, in a strong series C round and beyond for founders to take money off the table, especially when the VC appetite demands it. Typically, founders can sell as much as 10-20% of their vested shares, which can be worth 10s of millions of dollars or more.
- dzonga 6y agofor an insurance company, who supposedly uses bots, their numbers are horrible. $1M in marketing spend to generate $2M premiums. Revenues are low, losses are ultra high
- propter_hoc 6y agoHow do you figure? A 6 month CAC payback period (based on the numbers you are quoting) is totally fine for a recurring revenue stream, even if it were at typical SaaS churn rate. Besides which, churn is really low in insurance, certainly much lower than for the typical SaaS product.
- shostack 6y agoNo kidding. Many SaaS businesses would kill for that payback period.
- Abalancedview 6y agoUnfortunately their LTV / Cac is terrible, I've provided a full teardown on what parts of the S-1 trouble me the most (unit economics and revenue growth). https://balancedview.substack.com/p/lemons-for-lemonade https://balancedview.substack.com/p/lemons-for-lemonade Their payback period isn't 2 years, not even close with 18% gross margins. Let me know what you think!
- shostack 6y agoInteresting analysis, thanks for sharing. I don't have an insurance background, but I do come from the SaaS marketing world. From that perspective, your modeling makes sense, but it leaves me questioning the core assumption behind your conclusion: > "Lemonade has a great product. I personally enjoy using their app - its smooth, incredibly user friendly, and turns a chore into a pleasant task. Lemonade’s revenue growth has been incredible thus far. Despite the tear-down above, I think there is strong product market fit and the target market appreciates the value proposition. Unfortunately, at this stage of a company’s life and the current environment, public investors will not view widening losses in a positive light." Given the uncertain environment, is possible that investors are taking a longer-term view of what is needed to establish a new leader in the saturated insurance vertical? You acknowledge the strength of their UX, and it seems they've been investing in building their brand and not just focused on performance marketing. Done effectively, this would continue to deliver efficiency improvements to CAC in the years to come if they can cement themselves as a household name that is a good alternative to State Farm and the like. Based on that, I'm curious what CAC trajectory they would need to have (and by extension how realistic that looks for their channel-level marketing performance) to get investors excited. I haven't read the S1, but I'm also curious how their fundamentals compare to other insurers. Is this a company that wants to be valued like a tech company and deserves it? Or should they be valued like a more traditional insurance company? Does their approach give them a unique avenue to sell in higher-margin products and services that will flip the current assumptions on their head?
- T3RMINATED 6y agoThis is honestly the first I'd ever heard of their company; interesting! Only thing that would keep me from jumping is lack of auto insurance as well, but I understand NOT being in to that business. I hope they do well.
- azinman2 6y agoWhat protects them? It’s unclear to me what’s their “unfair advantage”. I can tell you what it’s not — a chat bot. Unless they have some NLP/AGI breakthru (and if so, why are they an insurance company?), the apps that Allstate, Geico, etc are pushing should be able to do the same thing. Even if not in a “chat” interface, the end result will be the same. So do they simply have a nicer UX / more appealing model (marketing) to a younger generation? If so, I’m surprised they weren’t bought by one of the bigger brands by now.
- andoriyu 6y agoRecently had to shop for renter insurance. Lemonade chat bot was the best one. It was the only place I could get insurance without talking a human being. AllState took 4 calls and multiple callbacks just to send me a final quote. While waiting for last callback I just went ahead and got Lemonade. Most insurance carriers I called want to "We can't find your quote, can you please repeat all those pages again, so we can start a new one?" Most don't disclose what features they offer and let you customize it _fast_. Fucking AllState didn't even show much property cost is insured until I called them and it didn't let me add more coverage until I called. 9.99 a months is very cool, but I would like to know how much and what insured first. Customer support is pretty good as well at Lemonade. One email and my old policy canceled and all personal items transferred to new place. That is on top of the fact that no one goes above 300k and make you buy a 1m umbrella policy. All while trying to sell you car insurance, life insurance, shit yo pants insurance.
- kccqzy 6y agoThey don't need their automated chat bot to handle everything to have a competitive advantage. I once made a claim through Lemonade. My case was simple: my bike was stolen, and I had a police report, a picture of bike, and also the original purchase receipt. My claim was entirely automated. The point is not to build a chat bot that handles everything, but a chat bot that handles a larger fraction of claims than competitors. And that drives down costs.
- a_quigley 6y ago> If so, I’m surprised they weren’t bought by one of the bigger brands by now. From the S1 "As a public benefit corporation, we will be less attractive as a takeover target than a traditional company would be and, therefore, your ability to realize your investment through an acquisition may be limited. Under Delaware law, a public benefit corporation cannot merge or consolidate with another entity if, as a result of such merger or consolidation, the surviving entity's charter "does not contain the identical provisions identifying the public benefit or public benefits transaction receives approval from two-thirds of the target public benefit corporation's outstanding voting shares. Additionally, public benefit corporations may also not be attractive targets for activists or hedge fund investors because new directors would still have to consider and give appropriate weight to the public benefit"
- bryanmgreen 6y agoNice to see another growing company be a Public-Benefit Corporation as well as a Certified B-Corp. Wall Street needs more of them.
- Apocryphon 6y agoI wonder how Metromile's numbers compares to theirs.
- aphextron 6y agoThey've somehow managed to build an insurance company that loses money. Incredible.
- bradlys 6y agoAm working at similar insurance "tech" company. Maybe you'd be surprised at how easy it is to lose money... At least - to me - it seems hard to be profitable with the margins required to have a silicon valley office + salaries. The company I'm at is very worried about loss ratio. You oversubscribe to one region because you're competitive there and some minor weather event happens - bad time. Even if your company isn't paying directly for losses, you lose lots of money in having to handle claims and you lose leverage with contracts in the future with the people who do actually pay out the claims.
- a_quigley 6y agoWhich one is that?
- bhupy 6y agoThe margins in insurance are extraordinarily thin. Even your largest health insurers have an average profit margin of ~5%.
- MAGZine 6y agoAs a company trying to donate their leftover cash to charity, what's the benefit of being public? Won't being beholden to shareholders mean wanting to increase shareholder value vs upholding their commitment to charity?
- bradlys 6y agoWhere does it state they're giving all "leftover" cash to charity? I guess it says it at the beginning but it sounds like marketing speak. What is even "leftover" anyway? > Our 2019 annual Giveback for the 12 month period ended June 30, 2019 amounted to about 1.5% of earned premiums. They take 25% on all premium to begin with. From what I know - standard in the industry is somewhere between 20-25% cut. So, for them to take effectively 23.5% isn't weird at all. If they go public - their employees can cash out. There's no way anyone at Lemonade will stay unless that stock everyone is earning gets paid out.
- say_it_as_it_is 6y ago"In our model, we minimize any incentive to deny legitimate claims as we aim to give back, rather than pocket, leftover monies. After our customers purchase a policy, we ask them to designate a charitable cause for us to support with the residual premiums from their policy. Despite there being no contractual obligation requiring us to donate leftover premiums to nonprofits, when a customer embellishes a claim, such customer reduces the total amount available that can be contributed to nonprofits. As a result, we believe customers are less inclined to embellish claims as they would be hurting a nonprofit they care about, rather than an insurance company they do not."
- strogonoff 6y agoIt seems that Lemonade advertises charity as a psychological trick to make customers willing to claim less money on their insurance, but is unlikely to have processes in place that make donations actually work this way. If Lemonade were serious about charity, wouldn’t they make themselves contractually obligated to donate excesses?
- annoyingnoob 6y ago> If there's money leftover, we give it back to causes I grabbed that quote from the web site. With State Farm if there is money left over they give it back. While donating to causes is great, since you want to avoid doing that it just looks like marketing. We've really bad fires in CA in the last few years. I think claims were in the $12B range from the 2018 fires. What happens to Lemonade when there is a mass causality like this and many insured make claims at the same time?
- fuzzer37 6y agoI'm not too knowledgeable about insurance in general, but from the S1 they say "At Lemonade, excess claims are generally offloaded to reinsurers". So, I'd assume if too many people start making claims, they themselves have insurance against that happening.
- annoyingnoob 6y agoTurtles all the way down?
- fuzzer37 6y agoPresumably reinsurance claims are less frequent, and thus have some sort of different pricing structure. The wikipedia page on the subject is pretty interesting: https://en.wikipedia.org/wiki/Reinsurance https://en.wikipedia.org/wiki/Reinsurance
- 9nGQluzmnq3M 6y agoLinks to this, which must be the coolest-sounding organization in the entire insurance industry: https://en.wikipedia.org/wiki/International_Society_of_Catastrophe_Managers https://en.wikipedia.org/wiki/International_Society_of_Catas...
- Phillipharryt 6y agoOh but you haven't heard of the 'Equitable Life Assurance Society'. Not just an organisation but a proper business until the 21st century. Originally the "Society for Equitable Assurances on Lives and Survivorships", but obviously that wasn't hip enough to survive past the 19th century. https://en.wikipedia.org/wiki/The_Equitable_Life_Assurance_Society https://en.wikipedia.org/wiki/The_Equitable_Life_Assurance_S...
- CapriciousCptl 6y agoThis is a neat company. Kind of interesting starting a new insurer at a time of near zero interest rates. My gut is by using “AI” they mostly have a cost advantage as opposed to better risk management but could be wrong and will read through the filing. For anyone interested in diving in, I’d recommend reading this first— http://www.columbia.edu/~dn75/Analysis%20and%20Valuation%20of%20Insurance%20Companies%20-%20Final.pdf http://www.columbia.edu/~dn75/Analysis%20and%20Valuation%20o...
- nyxtom 6y agoThis company is awesome, their integration into online mortgages and various third-party platform home purchase listings/offerings makes them especially suited to take over as things continue to progress in purchasing and closing homes entirely online. I recently closed on a home through better.com and lemonade is integrated quite well there as one of the options. Much of their revenue comes from new homeowners and it definitely shows why.
- jordache 6y agoopex is significant in the insurance industry's profit margins. If you can sustainably conduct underwriting or any of the back-office flow w/o humans, you are at an advantage in terms of operational cost. Quite often in the insurance industry a cost margin in the low single digits is considered good.
- carstenhag 6y agoHave gotten ads for Lemonade in Germany. Their ads are very misleading: - The ad is for a Haftpflichtversicherung. It pays, when you for example use the phone of a friend and it falls down. You are obligued to pay for the damage. - In the ad, they make it seem like your own device is insured, which is not the case. It does not seem to me that they are to be trusted.
- ArmandGrillet 6y agoUsing Getsafe in Germany, the app is good but they don't offer a full translation of contracts in English (but AFAIK: no insurance does).
- randtrain34 6y agoThis is pretty insane, it's just 5 years old!
- supernova87a 6y agoThis is also for me, the first time ever hearing about this company. And reading their mission statement, they say: "Harness technology and social impact to be the world's most loved insurance company." This is a little bit laughable. Since when ever has a bank, insurance company, or finance-related company been "loved" by its customers? Bringing you joy every day? Maybe they should aspire to a more realistic goal.
- idoh 6y agoPoint taken, but a lot of people seem to really like their credit union (which is a bank).
- glofish 6y agoAsked for a quote for my home, got an estimate that is twice more expensive than what I already have with Progressive so much for machine learning algorithms ... :-)
- justinzollars 6y agoI shopped on Lemonade and found a low grade insurance offer. Why is this on hacker news?
- coronadisaster 6y agoNot available in FL... Scared of hurricanes?
- HeavenFox 6y agoI use lemonade for my renters insurance, since it’s cheaper than the alternatives. I have to say their UX is a classic example of form over function. - To buy and manage a policy, you have to install their mobile app. They have a website, but to do anything substantial they redirect you to the app. - I canceled the credit card I use for the premium. To update the credit card, I have to use the virtual chat bot, which comes with fake “typing…” indicator. I bet these fancy UX cost them a lot of money, but literally made the experience worse.
- johnbellone 6y agoI was able to quote and finish two homeowner's policies without downloading and installing the application. It was a great experience. The only issue was modifying the policy prior to it being accepted by mortgage servicer (part of escrow).
- tootie 6y agoThose kind of patterns sound like they are business-motivated and not form over function. Look at sites like Facebook or Reddit that are perfectly suited to mobile web but aggressively push users to apps. Apps make for a walled-in experience and more engagement. And they let companies push more and more features you didn't ask for.
- 9nGQluzmnq3M 6y agoFor a site like Facebook and Reddit that most users use daily, sure, but how often do you want to engage with your insurance company?
- koolba 6y agoFacebook wants you to use the app so that they can deliver an all encompassing ecosystem. It’s a gateway to more functionality ina controlled environment. Reddit just wants you see ads. The percentage of Reddit users that block ads must be astronomical.
- godzillabrennus 6y agoYou are talking about two of the most powerful sentiment analysis engines ever built. Facebook try’s to tie sentiments to a reasonably verified identity while reddit adopted a less sophisticated wild Wild West approach. Facebook is winning that war. Knowing people so you can sell ads at an auction to them is what makes you rich.
- 55555 6y agoDoes anyone know why they chose to offer renters/casualty insurance? I understand how their model is a bit different from other insurance companies, and I think that's cool. But I'm still left wondering why they thought this form of insurance (as opposed to auto, life, etc) was the easiest to attack.
- aquigley 6y agoDefinitely the easiest insurance line to get started in for a variety of reasons. Things like easier compliance, younger and uninsured demographics that are easier to market to, and reduced complexity Regulators also don't put as much financial scrutiny in lines that don't have high caps (although they still scrutinize other aspects like consumer protection). If a "renters only" insurance agency goes under, most guaranteed funds could pay it out without much consequence. It is a whole different story if a major health insurance company were to go under.
- 55555 6y agoThank you; that makes sense
- gizmodo59 6y agoCan someone explain the following? 1. Is it natural for CFO's to receive that many options? The executive compensation chart looks like CFO receives much more than anyone else. 2. https://imgur.com/a/Jl6W1P8 https://imgur.com/a/Jl6W1P8 Do they not share the % shares owned by everyone until IPO?
- drinkzima 6y agoIt's based on timing of hires. These are grants over a fixed time period. The others have shares vesting from before.
- a_quigley 6y agoThe rest of the executives probably having ownership. If the CFO was a late hire, their compensation comes from the options. I haven't done much research on the CFO but many companies bring in a CFO as they prepare to IPO
- foghornleghorn 6y ago"Delight" consumers was used 34 times in their S1. "Delighting" customers seems to be the new hip way to describe what SAAS companies should do these days. At the end of the day, it's nothing but marketing speak. Lemonade is not a true software company... it's an insurance company at its core. And let's be honest -- nobody gets delighted when buying insurance or making an insurance claim.
- bradhe 6y ago> the worlds most beloved insurance company. Woof.
- Abalancedview 6y agoHi all, I think this thread has been full of great discussion, and there has been many questions surrounding Lemonade's financials and strategy. I am a former investment banker, and enjoy analyzing companies in my spare (limited) time. I've been following Lemonade since 2018 so their S-1 filing piqued my interest. https://balancedview.substack.com/p/lemons-for-lemonade https://balancedview.substack.com/p/lemons-for-lemonade Long story short, I think there are two major topics that pop out upon reviewing. 1) The unit economics are extremely concerning. 2) Cedeing 75% of gross written premiums starting June 2020 not only shifts business model towards a brokerage business, but also calls into question the true value add of their heavily marketed ML / AI platform for underwriting, and the ensuing loss decrease that can be generated from better data = more profits. Happy to answer any questions, appreciate the look!
- aquigley 6y agoInteresting read! It took me a bit longer to get through that S1 than you though. A few points I'd love to discuss > to become more efficient versus than competitors and ultimately lower loss ratios I didn't see them explicitly mention their focus on reducing LR for their business model. I read the LR data as a metric to prove their sustainability. However, I explicitly saw them mention that they want to generate consistent profits, with a reduced focus on pricing/claims, by just taking a fee. Their utilization of ML AI is focused on the UI > Thus the strategy of lowering their revenue, as ceded revenue to reinsurers doesn’t contribute to GAAP revenue Where is there GAAP revenue reported? To me it looks like they included ceded revenue in both "Total Revenue" (is this GAAP?) and their non-GAAP "Operating Revenue"
- Abalancedview 6y agoThanks! After drafting & reading S-1s for years, my superpower is skimming through quickly :) On your first point, Lemonade's loss ratios are currently higher than industry average. This is likely tail weighted & driven by a few outlier claims, as their premiums underwritten are minuscule versus their large competitors. Lemonade has every incentive to continue pricing risk better, and ML is the perfect tool for this. Having spoken to CIOs (chief insurance officers) in the industry, the amount of data insurance companies generate is tremendous, and very quickly ML can spot correlations between price, claims payouts, frequency, etc. Harnessing the data as the largest insurcos are surprisingly manual & paper based, and asking the right questions to the machine is the hard part, but Lemonade has the advantage of being more nimble & not encumbered by the legacy tech stack. Lemonade's original philosophy of taking a flat fee & donating the unpaid claims, was driven by disincentivzing fraud. They hired behavioral scientists, and this was big marketing push for their 1.0/1.5 platform. Insurance companies only have so many value levers to pull, and I think while not explicitly stated in the S-1, reading through publicly available posts & data show Lemonade is very much focused on pricing risk correctly and lower LR. Regarding point 2, GAAP revenue (rarely use this term) is on the income statement throughout the S-1 (pg 18 is the first instance). Ceded premium to reinsurers is excluded from GAAP revenue (pg 103 has a table breakdown). My thought is Lemonade is marketing GWP front and center on page 2, but shifting their biz to be heavily ceded to insurers, which lowers revenue. Yes, Lemonade is receiving a fee in exchange, and maybe lowering liabilities on their balance sheet. But, its not a great trade because 1) expensive CAC to cede it away, 2) they essentially become a broker, and brokers don't generate the multiples investors want, and 3) they don't take advantage of insurance float.