Lemonade files S1 • Hacker News Board

Re: Lemonade files S1

#61

Post by hardikgupta » Mon, Jun 08, 2020, 6:49 PM UTC

xfour wrote: post #12

In 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 g…

Loss ratio is a specific measure in the insurance industry. You don't need to get to 0% loss ratio for the company to be profitable and ~70% loss ratio isn't bad for a relatively new company. Typical P&C insurance companies have loss ratios ~ 50%.

Re: Lemonade files S1

#62

Post by CapriciousCptl » Mon, Jun 08, 2020, 6:50 PM UTC

This 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%20o...

Re: Lemonade files S1

#63

Post by pionar » Mon, Jun 08, 2020, 6:52 PM UTC

deeg wrote: post #41

afwaller wrote: post #3

You 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?

I'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 processe…

I'm not sure what's in it for me as a consumer. I did a quote with them a couple weeks ago, and even with all the "discounts", it came in at almost double the premium with worse coverage.

Re: Lemonade files S1

#64

Post by nyxtom » Mon, Jun 08, 2020, 6:53 PM UTC

This 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.

Re: Lemonade files S1

#65

Post by [deleted] » Mon, Jun 08, 2020, 6:53 PM UTC

chimeracoder wrote: post #50

gen220 wrote: post #20

Earlier quoted context omitted.

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%). 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 cent…

> 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%.

[deleted]

Re: Lemonade files S1

#66

Post by annoyingnoob » Mon, Jun 08, 2020, 6:58 PM UTC

fuzzer37 wrote: post #57

annoyingnoob wrote: post #53

> 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 causa…

I'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.

Turtles all the way down?

Re: Lemonade files S1

#67

Post by bhupy » Mon, Jun 08, 2020, 7:00 PM UTC

aphextron wrote: post #36

They've somehow managed to build an insurance company that loses money. Incredible.

The margins in insurance are extraordinarily thin. Even your largest health insurers have an average profit margin of ~5%.

Re: Lemonade files S1

#68

Post by [deleted] » Mon, Jun 08, 2020, 7:01 PM UTC

afwaller wrote: post #3

You 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?

[deleted]

Re: Lemonade files S1

#69

Post by arkades » Mon, Jun 08, 2020, 7:02 PM UTC

chimeracoder wrote: post #50

gen220 wrote: post #20

Earlier quoted context omitted.

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%). 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 cent…

> 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%.

That applies to health insurance. I don't believe it applies to any other kind. Lemonade isn't a health insurer.

Re: Lemonade files S1

#70

Post by arkades » Mon, Jun 08, 2020, 7:04 PM UTC

chimeracoder wrote: post #60

nostromo wrote: post #58

Earlier quoted context omitted.

Which 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.

> Which creates a perverse incentive for insurers not to care about payouts Yes, this is a common criticism of the ACA.

It's a bad one.

Controlling medical expenses isn't easy. Neither is getting admin + overhead under 10%. You need both to get a reasonably profitable insurance product.