81–90 of 194 posts
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You really only would have heard of them of you got served an ad by them. They do a lot of digital marketing. You must not be in their target demo. Not knowing who you are, may I ask why you think that is?
I'm always blown away when I encounter someone who browses the web without an ad blocker. There's a better way, man!
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Not disagreeing that is part of the strategy, but also it is worth thinking how much overhead there is in the insurance industry. How many offices are there nationwide? How many of the jobs are essentially basic data ingestion? Approving of claims? How much is spent on advertising? Probably a fair amount of fat to trim.
Hard to put together VC-sized returns out of trimmed fat.
That depends on how large the industry is, what its cost structures look like and how price sensitive it is.
A small, persistent cost advantage can be enormous in the insurance industry.
You're also saying that in a thread about a company that just produced VC-sized returns and is IPO'ing. Your premise clearly doesn't follow, as most VCs invest early and will exit with an IPO like this. The primary question going forward with Lemonade is for public shareholders and whether the company can get a lot bigger in the future. The VC-sized returns were already generated for the early VCs.
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> "the founders probably already did by selling to the VCs" That is the opposite of how that works, FWIW. Unless the founders took VC money to pay themselves multi-million Dollar salaries or something?
It's fairly common, in a strong series C round and beyond for founders to take money off the table, especially when the VC appetite demands it. Typically, founders can sell as much as 10-20% of their vested shares, which can be worth 10s of millions of dollars or more.
I'm a bird in hand guy when it comes to equity at the fast-growing private companies I tend to be attracted to. I'm almost certain I'd feel differently if I had a larger stake or founder-level attachment to what was being built.
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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%.
Whoa - if typical loss ratios are around 50%, surely there is a big opportunity for someone else to swoop in with cheaper insurance products?
Earlier quoted context omitted.
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%.
Whoa - if typical loss ratios are around 50%, surely there is a big opportunity for someone else to swoop in with cheaper insurance products?
Earlier quoted context omitted.
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%.
Whoa - if typical loss ratios are around 50%, surely there is a big opportunity for someone else to swoop in with cheaper insurance products?
If you look at the auto insurers, it's incredibly competitive and everyone is trying to balance those unit costs with the loss ratio. They are all moving targets but premium pricing is heavily regulated meaning your pricing will 100% come under scrutiny from some states (this must be done individually for every state in the U.S.) so any changes to pricing tends to be a complex process that could take months, if not a year+ (in some states) to take effect.
So when you get pricing wrong and are taking a big claims loss, it takes some time to dig out of that and you'll also piss off lots of customers who got in "cheap" and are now getting a rate increase. And when you get pricing wrong and you're loss ratio starts looking better, your competitors may be out-pricing you, making you uncompetitive until your adjustments are improved.
> 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…
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 have claims that far exceed the value collected by the policies over several terms.
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> 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.
For health insurance, the rule is:
> Health Insurance companies must spend at least 80% of the money they take in from premiums on health care costs and quality improvement activities. The other 20% can go to administrative, overhead, and marketing costs.
As a health insurer, you can lower premiums while increasing spending on "Quality improvement", to provide a better experience at a lower rate, and increase your market share. This is one dimension of competition that is only beginning to be competitively explored.
If you can get quality improvement at lower marginal costs (which is ultimately a tech problem), you're a more competitive health insurance company.
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?
> apply pricing discrimination in a way that a human could not because of regulation? I've read several anecdotes of people hard coding hacks into black box algorithms which end up being discriminatory even when stuff like race is not a direct input. I do not think the law cares how discrimination is arrived at.
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