Will ‘Lemonade’ Be the Uber of Homeowners Insurance?

[FEX Quotes]

Almost 3 centuries ago a rather intelligent spectacled fellow from Philadelphia came up with a very similar idea..

http://www.contributionship.com/history/

 

[MrGolf]

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

Kentucky has been honored to have a few self insurance funds go bust. As noted above, most recently, the Kentucky School Boards Trust went under just a year or two ago... And about a decade ago another SIF, AIK (Associated Industries of Kentucky), went down. There's a hospital here in the state that got hit with about a $15M surcharge as result of their assessment!

 

[maxherr]

State regulations would have to be changed.

Not true. Every state already has a definition of "insurer" in its insurance code. While the financial requirements may vary from state to state, essentially anyone capable of making a contract can be an insurer. Of course, in the standard market, one has to be admitted to transact first. That doesn't mean that "Lemonade" will easily be admitted to transact P&C coverage in any particular state -- but if they can gain admittance to New York, they'll probably be able to be admitted most anywhere else.

Personally, I don't much care to do business with insurance start-ups, but that doesn't mean they should be ignored. If they have the reinsurance agreements in place to backstop their claims exposure, and they have an AM Best rating, I wouldn't necessarily take a pass on them.

And as for those who don't want their roof pooled with one that's 25 years old already, well, guess what? You probably are pooled with a lot more older roofs than newer ones. If you got a discount for having a newer roof, then you've been compensated for it.

The question that attends a discussion of any insurance company is simple: Will they have the money needed to pay MY claim when I submit it? As long as the answer is YES, I don't much care who else they insure as long as we are all paying a fair price for our coverages.

Business models in insurance are changing, and agents are being carved out of the equation by some, but not all, companies. Those who attempt to serve the public without agents may save money in the short term, but how much hand-holding will they be willing to do when it comes to those clients who have a new question every week, who want new quotes for their home and auto coverage every 6 or 12 months?

For many consumers, insurance is too personal to deal impersonally with a computer alone. I can do it for myself, but, as a licensed agent, I know what I'm doing. The real problem some D-I-Y consumers will encounter is having a claim denied because they misrepresented something in their application for insurance, or they undervalued the replacement cost of their home in order to "save" premium dollars, only to discover -- at the time they tender a claim form -- that they are below the 80% coinsurance threshold, and their claims payments will be adversely affected. A good agent would not let that happen.

Agents who want to stay in business will have to adapt and demonstrate their value to consumers in order to win their business.

 

[RicFlairII]

People who want to burn their house down would seek out one of these peer-to-peer Lemonade type companies, due to their "relaxed" underwriting.

One or two of those claims and the company would be hurting.

 

[Norwayguy]

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.

Unless they get a bailout that you pay for.

 

[JohnWalker]

Companies like this already exist. A forum sponsor E&O for less does something similar for their policies. It's actually pretty attractive to consumers because premiums end up being super low relative to standard policies.

They'll mostly get nonstandard business though. Probably a lot of people who don't understand the value of insurance but have to get it because of a mortgagee, loss payee, or lein holder.

 

[insurance1822]

Not true. Every state already has a definition of "insurer" in its insurance code. While the financial requirements may vary from state to state, essentially anyone capable of making a contract can be an insurer. Of course, in the standard market, one has to be admitted to transact first. That doesn't mean that "Lemonade" will easily be admitted to transact P&C coverage in any particular state -- but if they can gain admittance to New York, they'll probably be able to be admitted most anywhere else.

Personally, I don't much care to do business with insurance start-ups, but that doesn't mean they should be ignored. If they have the reinsurance agreements in place to backstop their claims exposure, and they have an AM Best rating, I wouldn't necessarily take a pass on them.

And as for those who don't want their roof pooled with one that's 25 years old already, well, guess what? You probably are pooled with a lot more older roofs than newer ones. If you got a discount for having a newer roof, then you've been compensated for it.

The question that attends a discussion of any insurance company is simple: Will they have the money needed to pay MY claim when I submit it? As long as the answer is YES, I don't much care who else they insure as long as we are all paying a fair price for our coverages.

Business models in insurance are changing, and agents are being carved out of the equation by some, but not all, companies. Those who attempt to serve the public without agents may save money in the short term, but how much hand-holding will they be willing to do when it comes to those clients who have a new question every week, who want new quotes for their home and auto coverage every 6 or 12 months?

For many consumers, insurance is too personal to deal impersonally with a computer alone. I can do it for myself, but, as a licensed agent, I know what I'm doing. The real problem some D-I-Y consumers will encounter is having a claim denied because they misrepresented something in their application for insurance, or they undervalued the replacement cost of their home in order to "save" premium dollars, only to discover -- at the time they tender a claim form -- that they are below the 80% coinsurance threshold, and their claims payments will be adversely affected. A good agent would not let that happen.

Agents who want to stay in business will have to adapt and demonstrate their value to consumers in order to win their business.

^^ Dude just served up a can of whoop @$$

 

[BigIVU]

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.

Dan

Presumably the guaranty fund would bail them out and founders would move on with whatever income they've amassed. Insurance departments should vet their capitalization carefully.

 

[lcalhoun]

I had never heard about this until this article. After a little research, other countries have similar companies. Friendinsurance or Guevera seem to be the most successful. Their business models don't vary to much from regular insurance companies, but if I were having to be the carrier of a company like themselves, I'd be terrified of the lawsuits that could come in the future. Although it sounds all nice and pretty, doesn't seem logical. I believe there is a reason the insurance industry has not changed in so many years. Comparing uber to this is ridiculous. Of course there is a better option than a taxi...

 

[insurancemansam]

I can see this attracting people with poor claims history and credit. These people always think they are getting screwed by the insurance company when in fact they are the problem. For responsible home owners this is not as attractive.