Will ‘Lemonade’ Be the Uber of Homeowners Insurance?

[Brian Anderson]

According to a new article on Bankrate (link below), a new startup called "Lemonade" is looking to shake up the traditional homeowners insurance market with a “sharing ecomony alternative.”

From the article:

New York-based cofounders Daniel Schreiber and Shai Wininger vow to reinvent insurance "in ways not available to the legacy insurance carriers," with the goal of making insurance a "delightful" experience for consumers. The name reflects the pair's goal of turning shopping for insurance, which consumers consider a lemon, into, well, lemonade. So far, they've raised $13 million in initial funding.

Schreiber says Lemonade has recruited seasoned insurance actuaries and professionals, including a few big names in the industry, to flesh out how P2P property and casualty insurance would work. But unlike Uber and other car-sharing rebels, the Lemonade makers are already working with New York regulators and plan to launch as a fully approved and licensed insurance carrier, not a broker.

"Most Americans view insurance as a necessary evil rather than a social good, and that's something we'd like to change," Schreiber said in Lemonade's money-raising pitch. "We're challenging the way insurance companies work, with a peer-to-peer business model fueled by self-serve technology."

They’ve got some serious backing, and hope to launch within a few months. Any predictions on how they’ll fare?

Will ‘Lemonade’ be the Uber of insurance? - Bankrate.com

 

[nyc2phi]

I don't get the whole peer-to-peer business model. How would that work?

The idea still sounds like traditional homeowners insurance. Pool a large amount of money from customers and pay out claims. The only difference is they plan to give back what's left over to customers?

It also appears there will be minimal underwriting. That sounds smart..

 

[djs]

Obviously, this has been attempted in the health insurance market, a lot of 'Christian Ministry' health insurance policies operate under the same principle as this does.

As such, it will have the same problems. Except in this case, lien-holders won't accept it.

Who pays if there are not enough reserves to cover the losses? My guess is this type of plan will be geographically concentrated, so if there is a big storm or other catastrophic loss, the fund of this insurance will rapidly get wiped out and leave a lot of claims uncovered.

If they can solve the claims problem, then the rest of the experience is probably about the same, but I'm game, lets see the real plan past the buzzwords.

Dan

 

[FL P&C Broker]

How is catastrophic risk going to hedged?
Who is going to handle the underwriting? (I don't want to be pooled with the guy that has a 25 year old roof)
Who is going to handle the billing and everyday service?

Once they address those things it seems like they are nothing different than an everyday insurance company.

 

[djs]

How is catastrophic risk going to hedged?
Who is going to handle the underwriting? (I don't want to be pooled with the guy that has a 25 year old roof)
Who is going to handle the billing and everyday service?

Once they address those things it seems like they are nothing different than an everyday insurance company.

Exactly! This is a cute marketing gimmick. In truth, they describe everyday insurance and how it works, but, they spin it as a new thing.

On top of that, it sounds like they want to avoid some of the expenses and limitations placed on normal insurance carriers, such as having to have a certain amount of reserves just to write a policy.

Dan

 

[bobson]

Obviously, this has been attempted in the health insurance market, a lot of 'Christian Ministry' health insurance policies operate under the same principle as this does.

As such, it will have the same problems. Except in this case, lien-holders won't accept it.

Who pays if there are not enough reserves to cover the losses? My guess is this type of plan will be geographically concentrated, so if there is a big storm or other catastrophic loss, the fund of this insurance will rapidly get wiped out and leave a lot of claims uncovered.

If they can solve the claims problem, then the rest of the experience is probably about the same, but I'm game, lets see the real plan past the buzzwords.

Dan

Its actually a lot more like our farm mutual companies. They pay the expense of small claims and turn over large losses to a reinsurer. In this case though if it is like the deal they have in Britain, Guevera, you get to pick who is in your pool. It seems to me insurance works better with larger numbers so I don't see this working.

 

[Arnage150]

I don't see this going anywhere. Whoever invested 13m was a very stupid rich person.
There are companies that share their profits every year. They are called Mutuals and have been around for 100 years.
Banks would have to accept the idea and they are not stupid with their money.
State regulations would have to be changed.

It almost sounds like a self insured workers comp trust (all of which folded in NY recently and caused a huge mess).
There are risk retention groups out there now for business insurance. This sounds similar. Those too are Swiss cheese policies bought by the ultra cheap consumer.

 

[insurance1822]

I would imagine they'll attract socialist liberals who will buy into it & then when the next superstorm Sandy hits they'll all lose everything & I will be happy and smile.

 

[Brian Anderson]

I don't see this going anywhere. Whoever invested 13m was a very stupid rich person.

Thinking it seems like a risky investment too, but was impressed by the other startups Sequoia Capital backed - Apple, Google, LinkedIn, Trulia, Airbnb. Then again, Sequoia probably also backed a lot of dogs we never heard of.

 

[hesse]

bunch of schools in Kentucky tried to get together and do something like this. Few major losses and I think they are still making payments on it....

Arthur J Gallagher sets these types of things up