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Lemonade files S1

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Re: Lemonade files S1

#131

Post by phonon »

divbzero wrote: post #122
phonon wrote: post #115

Earlier quoted context omitted.

The 72% does not include overhead or sales and marketing, just losses and LAE. I wouldn't call that very good. Their combined ratio is more like 200%

Thanks. I was looking for their combined ratio. I suppose it’s not surprising that overhead is high for a fast-growing company. As with many startups, GAAP only reveals part of the story and more fine-grained metrics are needed to gauge potential future profitability. For those unfamiliar with the combined ratio, taking a stab at an explanation by simplified analogy… For most normal companies: Revenue − Cost of goods…

In their most recent quarter--

  Net earned premium 25.3
  Net investment income 0.9
  -------------------------------------   
  Total revenue 26.2
  
  Expense
  
  Loss and loss adjustment expense, net 18.2
  Other insurance expense 3.3
  Sales and marketing 19.2
  Technology development 3.5
  General and administrative 18.2
  -------------------------------------   
  Total expense 62.4
  
  Loss before income taxes (36.2)

Re: Lemonade files S1

#132

Post by phonon »

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.

Insurance is not SaaS. The underlying loss related costs (Losses + LAE) will never go below 60% or so. (This includes reinsurance to cover catastrophic risks.)

See https://news.ycombinator.com/edit?id=23461599 for their most recent quarter. Sales and marketing were over 70% of revenue.

Their Y1 and Y2 net retention rates were 62% and 71%. This is below industry average.

Re: Lemonade files S1

#133

Post by grvdrm »

petra wrote: post #75
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…

So from your insider vantage point, how will the insurance job market look in 5-10 years ? What jobs, if any, would be left ?

Many. Insurance is hardly one type of job and many lines of insurance (e.g. for larger multi-national corps, for certain types of property, and etc.) aren't automated anywhere near the level of what you see in Lemonade's marketing/website/systems.

Re: Lemonade files S1

#134

Post by gen220 »

phonon wrote: post #131
divbzero wrote: post #122

Earlier quoted context omitted.

Thanks. I was looking for their combined ratio. I suppose it’s not surprising that overhead is high for a fast-growing company. As with many startups, GAAP only reveals part of the story and more fine-grained metrics are needed to gauge potential future profitability. For those unfamiliar with the combined ratio, taking a stab at an explanation by simplified analogy… For most normal companies: Revenue − Cost of goods…

In their most recent quarter-- Net earned premium 25.3 Net investment income 0.9 ------------------------------------- Total revenue 26.2 Expense Loss and loss adjustment expense, net 18.2 Other insurance expense 3.3 Sales and marketing 19.2 Technology development 3.5 General and administrative 18.2 ------------------------------------- Total expense 62.4 Loss before income taxes (36.2)

18.2 / 25.3 ain’t bad. Sales and marketing at 19.2 seems a bit high, but I guess they’re doubling down on growth, and it implies they have a long runway. The administrative costs is the one that you’ll want to see grow logarithmically, as 25.3 goes up, and it’s not unbelievable that it will.

Re: Lemonade files S1

#135

Post by itsoktocry »

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.

>Maybe it's highly dependent on location, or maybe I'm just way overpaying for renter's insurance.

Or maybe Lemonade is like many other "tech" companies, and is selling their product below costs in the hopes of growing into profits. From a consumer standpoint, gambling with your insurance in such a manner is scary.

Re: Lemonade files S1

#136

Post by tharne »

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?

> 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.

Re: Lemonade files S1

#137

Post by tharne »

itsoktocry wrote: post #135
0xffff2 wrote: post #93

Earlier quoted context omitted.

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.

> Maybe it's highly dependent on location, or maybe I'm just way overpaying for renter's insurance. Or maybe Lemonade is like many other "tech" companies, and is selling their product below costs in the hopes of growing into profits. From a consumer standpoint, gambling with your insurance in such a manner is scary.

> Or maybe Lemonade is like many other "tech" companies, and is selling their product below costs in the hopes of growing into profits.

This is exactly what they're doing. Take a look at their losses from claims. Brilliant marketing though, especially for an insurance company.

Re: Lemonade files S1

#138

Post by michaelmior »

HeavenFox wrote: post #126

I 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…

The worst for me was when I needed an overlap between my old and new policies, I was told I needed to open a second account with a different email.

Re: Lemonade files S1

#139

Post by 9nGQluzmnq3M »

tootie wrote: post #130
HeavenFox wrote: post #126

I 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…

Those 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.

For a site like Facebook and Reddit that most users use daily, sure, but how often do you want to engage with your insurance company?

Re: Lemonade files S1

#140

Post by 9nGQluzmnq3M »

fuzzer37 wrote: post #103
annoyingnoob wrote: post #66

Earlier quoted context omitted.

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

Links to this, which must be the coolest-sounding organization in the entire insurance industry:

https://en.wikipedia.org/wiki/International_Society_of_Catas...

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