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Lemonade files S1

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Re: Lemonade files S1

#101

Post by gen220 »

bsamuels wrote: post #74
gen220 wrote: post #26

Earlier quoted context omitted.

Insurance 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 i…

how do you tell the difference between investing in growth and poor underwriting discipline in such a young company?

It'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.

Re: Lemonade files S1

#103

Post by fuzzer37 »

annoyingnoob wrote: post #66
fuzzer37 wrote: post #57

Earlier quoted context omitted.

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?

Presumably 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

Re: Lemonade files S1

#104

Post by shostack »

propter_hoc wrote: post #90
dzonga wrote: post #13

for 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

How 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.

No kidding. Many SaaS businesses would kill for that payback period.

Re: Lemonade files S1

#105

Post by ArmandGrillet »

carstenhag wrote: post #92

Have 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.

Using Getsafe in Germany, the app is good but they don't offer a full translation of contracts in English (but AFAIK: no insurance does).

Re: Lemonade files S1

#106

Post by [deleted] »

bsamuels wrote: post #74
gen220 wrote: post #26

Earlier quoted context omitted.

Insurance 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 i…

how do you tell the difference between investing in growth and poor underwriting discipline in such a young company?

[deleted]

Re: Lemonade files S1

#107

Post by deeg »

0xffff2 wrote: post #93
pionar wrote: post #63

Earlier quoted context omitted.

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.

I just checked, and for my apartment they come in at about half of my current renter's insurance for similar coverage. Maybe it's highly dependent on location, or maybe I'm just way overpaying for renter's insurance. Unfortunately for them, switching away from the bank that already handles 95% of my finances isn't worth saving $100/year.

(Keep in mind that I am just an engineer and don't deal directly with policies.)

My understanding is that it is generally considered that renter's insurance is too high at most large carriers. There are historical reasons for this which I won't go into (and I don't understand all of them anyway). The carriers don't change this because:

1) Lowering renter's insurance premiums would require raising premiums elsewhere (e.g. homeowners). Raising rates causes customers to leave.

2) Renter's insurance is fairly cheap as it is and people don't price-shop all that much.

3) Shifting premiums brings regulatory scrutiny and you have to do it right (and legally). It's not worth the hassle.

I think Lemonade started largely with renter's insurance to take advantage of that gap. It's one of the things that put fear into the major carriers.

Before I started working in the business space I knew almost nothing about insurance (and didn't care). It's been fairly interesting and I have more empathy for the carriers than I used to; they aren't quite the blood-sucking maggots that some maintain.

Re: Lemonade files S1

#108

Post by nikanj »

gen220 wrote: post #94
harryh wrote: post #76

Earlier quoted context omitted.

It sounds like you don't know what "loss ratio" means in the context of an insurance company. Loss ratio is the % of premiums collected that are paid back out in claims. If the number is below 100%, then your core insurance business is profitable Of course, this doesn't mean your company is. Insurance companies have many expenses beyond paid claims. But loss ratio should never get to 0% and, by definition, can't be n…

Here to echo. I work in insurance and 72% is actually very good when you consider (1) their trajectory of how long it took them to get there (2) how strongly they're investing in growth, which is very expensive.

How to get there:

1) Grow really big with VC money (You'll need this for step 3)

2) Stop paying out claims with made-up reasons

3) If someone sues you to get their payout, use your massive resources to bankrupt them with legal fees

Re: Lemonade files S1

#109

Post by watchyourML »

toomuchtodo wrote: post #49
deeg wrote: post #41

Earlier quoted context omitted.

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…

What happens when regulators require disclosure of claim handling ML models, as they already regulate insurance rates?

Regulators 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.

Re: Lemonade files S1

#110

Post by ElliotH »

mywittyname wrote: post #87
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…

They are betting on the federal government stepping in. It's somewhat understood that it's impossible to insure against natural disasters of that scale. The payouts for normal fires or car accidents in an average year is predictable over the claim term. Natural disasters don't work that way. Insurance companies might go 10 years without a major claim, then suddenly there's a major disaster and 10% of their customers…

The reinsurance industry quite frequently handles claims like wildfire and hurricanes without needing federal government help.
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