Lemonade files S1 • Hacker News Board

Re: Lemonade files S1

#161

Post by zerni » Tue, Jun 09, 2020, 7:27 AM UTC

gen220 wrote: post #91

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…

Depending on your perspective of "ML", the insurance industry already uses "ML" (i.e. very complicated decision trees) to process claims. Very few large insurance companies are non-automated in claims processing. The places where the money hides, so to speak, include (1) handling complex cases [customers] (2) scaling a human's ability to process non-automatable settlements. (3) scaling internal support interactions w…

Working in “InsurTech” myself...

I’d say customer acquisition is the biggest cost and insurance companies are terrible at it because differentiation is almost impossible in a price driven by extreme price war.

It’s not uncommon that 30-50% of your travel insurance premiums are going to a broker or price comparison website. Talking about great value.

It’s not as sexy as ML in claims but one of the big innovations Lemonade has developed is looking like the anti-insurer and creating a huge PR machine around that. True or not, it worked.

Re: Lemonade files S1

#162

Post by zerni » Tue, Jun 09, 2020, 7:32 AM UTC

tharne wrote: post #137

itsoktocry wrote: post #135

Earlier quoted context omitted.

> 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.

Given the relatively small size of their book, a few outlier claims can destroy all their economics. It should regulate over time.

Re: Lemonade files S1

#163

Post by Phillipharryt » Tue, Jun 09, 2020, 7:39 AM UTC

9nGQluzmnq3M wrote: post #140

fuzzer37 wrote: post #103

Earlier quoted context omitted.

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...

Oh but you haven't heard of the 'Equitable Life Assurance Society'. Not just an organisation but a proper business until the 21st century.

Originally the "Society for Equitable Assurances on Lives and Survivorships", but obviously that wasn't hip enough to survive past the 19th century.

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

Re: Lemonade files S1

#164

Post by foghornleghorn » Tue, Jun 09, 2020, 7:43 AM UTC

"Delight" consumers was used 34 times in their S1. "Delighting" customers seems to be the new hip way to describe what SAAS companies should do these days. At the end of the day, it's nothing but marketing speak. Lemonade is not a true software company... it's an insurance company at its core. And let's be honest -- nobody gets delighted when buying insurance or making an insurance claim.

Re: Lemonade files S1

#165

Post by gen220 » Tue, Jun 09, 2020, 1:21 PM UTC

phonon wrote: post #149

gen220 wrote: post #134

Earlier quoted context omitted.

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.

> 18.2 / 25.3 ain’t bad. It's somewhat worse than average, but trending in the right direction. Will give a qualified "OK". > 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. It's very high, relative to written premium. You can always buy market share in insurance by increasing commissions and/or increasing marketing, and it's okay to o…

Agreed on all points. The only caveat I’d add is that they might not need all of that 300mm if they have a decent reinsurance deal on the books or in the hand. My guess is that they plan on keeping all of the expense rows more or less the same, while growing into new markets to increase their volume.

Re: Lemonade files S1

#166

Post by gen220 » Tue, Jun 09, 2020, 1:29 PM UTC

zerni wrote: post #161

gen220 wrote: post #91

Earlier quoted context omitted.

Depending on your perspective of "ML", the insurance industry already uses "ML" (i.e. very complicated decision trees) to process claims. Very few large insurance companies are non-automated in claims processing. The places where the money hides, so to speak, include (1) handling complex cases [customers] (2) scaling a human's ability to process non-automatable settlements. (3) scaling internal support interactions w…

Working in “InsurTech” myself... I’d say customer acquisition is the biggest cost and insurance companies are terrible at it because differentiation is almost impossible in a price driven by extreme price war. It’s not uncommon that 30-50% of your travel insurance premiums are going to a broker or price comparison website. Talking about great value. It’s not as sexy as ML in claims but one of the big innovations Lemo…

I’ve observed this, but I don’t think that any carrier has successfully figured out a way to grow that doesn’t involve brokers (digital or physical). They have a death grip on the market, with a very high percentage of potential members held behind their gate.

Like you, I’m not convinced that the value they add to the chain justifies their expense, but they’re legally and economically entrenched.

My only hypothesis for their eventual dissolution is that unit commissions will get smaller and smaller over time, as more brokers use tech to manage bigger books of business with lower employee headcount requirements, and brokers become more indistinguishable from carriers.

Or maybe some consortium of carriers will get together to build THE comparison shopping site, like healthcare.gov, and offer some ridiculous bonus payment to you the member for shopping there.

Re: Lemonade files S1

#167

Post by troughway » Tue, Jun 09, 2020, 2:20 PM UTC

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.

That and there isn't really a universal adblocker for mobile yet, so there is no way to get around them shoving poorly targeted ads in your face relentlessly.

Re: Lemonade files S1

#168

Post by junipertea » Tue, Jun 09, 2020, 2:21 PM UTC

Phillipharryt wrote: post #160

gen220 wrote: post #91

Earlier quoted context omitted.

Depending on your perspective of "ML", the insurance industry already uses "ML" (i.e. very complicated decision trees) to process claims. Very few large insurance companies are non-automated in claims processing. The places where the money hides, so to speak, include (1) handling complex cases [customers] (2) scaling a human's ability to process non-automatable settlements. (3) scaling internal support interactions w…

Decision trees are a type of Machine Learning, no need for the quotation marks.

Maybe they meant chaining if statements

Re: Lemonade files S1

#169

Post by Reebz » Tue, Jun 09, 2020, 2:33 PM UTC

michaelmior wrote: post #138

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.

I did this recently as I moved apartments, I think you were given incorrect info. You can easily open multiple policies under the 1 account (e.g. your move out date is June 1 and your move in date is May 15).

Re: Lemonade files S1

#170

Post by aquaphile » Tue, Jun 09, 2020, 7:12 PM UTC

harryh wrote: post #76

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…

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…

That misses a 3 key points:

1) 72% pure loss ratio is ok, but normally for these lines I'd aim for mid 60s. Nothing special to see here..

2) It took them THREE YEARS to get there, and they were exceedingly poor at selecting and managing risk for 2 years. 161% loss ratio??!! That is flunky-level poor risk management. If they had a reinsurer, that reinsurer is probably very unhappy and unlikely to renew the treaty.

3) The combined ratio is really poor. They are hemorrhaging cash because of high G&A and high sales & marketing. Again, after 3 years of effort. This indicates they have not operated any more efficiently that other legacy insurers, AND that Lemonade is spending aggressively to acquire customers.

Lemonade's competitors have vastly more financial resources and market reach, can cross-sell more products, can equal or better its tech experience (USAA, Esurance), operate more efficiently (every major direct P&C writer), and acquire customers at scale at equivalent or better acquisition costs. For the Lemonade investment thesis to work, one must believe they will eventually address these weaknesses at scale, and that they will be given a software valuation multiple when they are really just another direct writer of insurance.