Startup Lemonade Bets Behavioral Science Can Help Insurance Not Suck

By | February 24, 2016

  • February 24, 2016 at 11:07 am
    Jeff says:
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    I think this company will flop really quickly. I’d put the over/under at 2 1/2 years from the sale of the first policy to when doors are closed. Thoughts?

  • February 24, 2016 at 1:21 pm
    Canuck says:
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    Good Luck. They’ll need it.

  • February 24, 2016 at 1:32 pm
    vox sanitus says:
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    You know what they say…..give ’em enough rope. In the battle twixt corrupt, fallible human nature and Lemonade, I’ll have to bet
    on human nature. Sorry………….

    ‘The race is not always to the swift nor the battle to the strong, but that’s the way to bet.’ – Damon Runyon —

  • February 24, 2016 at 2:08 pm
    RJ says:
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    What the hell is peer-to-peer insurance anyway?

  • February 24, 2016 at 2:09 pm
    agent2 says:
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    Notice nobody that deals with the retail public was engaged. In a business that deals with the legal, regulatory and uneducated masses, good luck on the delightful experience thing.

    Only an intelligent person realizes that insurance is a good investment, even if you don’t have a claim. The rest abhor paying money for no tangible return.

    BTW this is a silly idea and will fail.

  • February 24, 2016 at 2:26 pm
    former claims guy says:
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    They will last exactly as long as the burn rate on the invested capital, and then the reinsurers will be left with the proverbial bag. Good luck changing humans. I think what they’re missing is that insurance claims disrupt lives, and people don’t like having their lives disrupted. And if they seriously believe they are going to change the behaviors of claimants and their attorneys, well, I know of this bridge for which I can quickly produce a quit claim deed if they’re willing to send me part of the VCs’ money…

    • February 28, 2016 at 4:51 am
      UW says:
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      Great point on much of the “problem” being disrupted lives.

  • February 24, 2016 at 2:51 pm
    Jack Kanauph says:
    Hot debate. What do you think?
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    $13 million would go a long way in helping Michigan get lead free water or feeding hungry people or helping Bernie Sanders get nominated. Instead, it will line the pockets of people with a dumb idea.

    • February 25, 2016 at 3:30 pm
      Milner says:
      Hot debate. What do you think?
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      What could be dumber than getting Bernie Sanders nominated?

      • February 26, 2016 at 12:20 pm
        Jack Kanauph says:
        Hot debate. What do you think?
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        A crook like Hillary getting nominated.

      • February 26, 2016 at 3:32 pm
        Agent says:
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        • February 28, 2016 at 4:53 am
          UW says:
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          You misspelled bipolar. You are also incapable of answering how ” the typical far left Progressive Democrat” would answer.

          • February 29, 2016 at 1:32 pm
            bob says:
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          • February 29, 2016 at 2:16 pm
            UW says:
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            No Bob, actually I’m not incompetent when it comes to conservatives. I am from a very conservative place, studied them extensively in college, and have read almost every conservative philosophy book. As an example, I also correctly predicted Trump would have staying power in the primary, because I understand conservatives in the US. On the other hand Agent predicted these guys would fall off presumably resulting in a win for Bush. Not 3 months ago mind you, but less than one month ago.

            Even if that were not true I could still comment accurately about Agent’s skills of analysis, because based on his comments here I know for a fact he is an outright dolt. You should check yourself since you seem to share most of his idiotic views. If you can’t read 5 of his comments and recognize him as an outright moron, sorry, but you’re just not educated, nor are you intelligent.

            You on the other hand repeat every bullshit right-wing talking point, and even went so far as dismissing Dixiecrats having moved to the Republican Party, something not really debated anywhere even halfway serious. You are more literate, but just as misinformed as Agent. I will acknowledge that an error in spelling is not relevant, unless it is something other than a typo or autocorrect, and done in the context of assuming a person’s intelligence. I see in other stories you have foregone the false civility you cling to so hard, which is a step in the right direction.

          • February 29, 2016 at 3:57 pm
            Bob says:
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          • February 29, 2016 at 4:11 pm
            Bob says:
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          • February 29, 2016 at 5:25 pm
            bob says:
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          • February 29, 2016 at 5:28 pm
            bob says:
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          • February 29, 2016 at 6:06 pm
            bob says:
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          • February 29, 2016 at 7:08 pm
            UW says:
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            Bob, there is a lot of ignorant bullshit here, even for you. I originally thought you were slightly more intellectual than the average conservative. I admit I was terribly wrong. You are an average right-wing dolt. It’s so much I will only address a few things.

            First, you state, “I mean really, this is coming from the same guy who claims studies show that minimum wage increases to $15 say it won’t harm the economy.”

            I replied to this, with studies. I do however it was a good amount of time after your long, incorrect statements, so you probably did not see it.

            The best general study on minimum wage is this one. It shows that the preponderance of all recently published studies on this show no effect on jobs for an increase of minimum wage at this level. It also shows that the ones that show a big negative impact are far less rigorous and incorporate more data. I would argue this is intentional, because the right-wing fraud machine is so large, but he article does not state that. Your commentary on Republicans offering an above capital alternative to minimum wage is also completely wrong, because it wasn’t really supported. It’s also a terrible idea. You have to search very hard to find that, because it wasn’t pushed by them as an actual alternative. Again, the leading candidates don’t believe in it, and Trump, the leader, has said it should be lower. Yes, if you go back before WWII you can find a handful of GOP guys in favor of it, but it’s not something the party supports. You also incorrectly state, “Obama then says: I will only pass an across the board $15 rate.” Which is interesting since the highest I have seen him go is $12/hr, and I’m sure you were here complaining when he had to override a filibuster by Republicans to even raise it to the $7 range, even though they are in favor of it.

            http://cepr.net/documents/publications/min-wage-2013-02.pdf

            You comically state, “Romney and Ryan lost on idealistic image destruction.” Which is incorrect. They lost because Romney slipped and exposed the Republican ideology about every non-rich person being a parasite, and because Ryan got annihilated in the VP debate (as Romney did in the last 2 debates). Ryan, the GOP wonderkid is a fraud, who puts forward fraudulent budgets. He’s a lightweight, and was exposed as such.

            The rest of your comments are the moronic rantings of an uneducated person, so why bother. But, you seem to cling to delusions of competence when it comes to minimum wage, despite all the actual economic evidence disproving your statements. I’m sure you have a Glenn Beck-level source to cite, by somebody who isn’t an economist, and looks at prewar rural areas, or some other bullshit, but the modern, real-world evidence is pretty overwhelming.

            Your debt rant is equally deluded. We are at near 0% interest rates, and for a time were at negative real interest rates, or approaching it. Debt is almost a non-issue right now, especially with an economy lagging on the demand side. Obama should have taken on significantly more debt in order to create spending projects, and decrease the value of the dollar a little. The main articles your side cite, by Reinhart & Rogoff has been exposed as completely wrong at least, and potentially fraudulent, as usual.

            You are far more clueless than I thought, nothing more than an idiotic, know-nothing, right-wing dolt. Go Trump you will be saying any day now.

          • March 2, 2016 at 2:44 pm
            bob says:
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            And I replied to you, showing 3/4ths of the studies out there in this state view that you are wrong.

            You just did what I accused you of doing.

            This is called disagreeing. It does not make me ignorant, and it does not make me an illiterate right winger.

            I am not a dolt for quoting studies. I don’t have time for your stupidity right now UW.

            I’m out.

          • March 2, 2016 at 2:53 pm
            bob says:
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            This site quotes students of Harvard, and Richard Sutch.

            Have you ever watched Glen Beck? I haven’t. Do you even know what he says? This is your issue, your labeling.

            National Bureau of Economic Research, 2010. That is one of my sources. He is a California University Professor of Economics.

            The jury is not settled on this. Your links have no more proven it doesn’t have a harm than mine disprove it. Neither make the argument settled as you have in partisan lunacy implied.

            If 3/4ths of the studies in one state disagree with you, you don’t get to say that it is settled debate.

            This would be like the supposed ignoring of climate change scientists, it is irresponsible.

            If you want to disprove my other areas you are free to try, instead of calling me a dolt, why don’t you try talking to the MODERATE who thinks you’re a fool?

            Because let me tell you:

            You’re not recruiting well for democrats.

            http://journalistsresource.org/studies/economics/inequality/the-effects-of-raising-the-minimum-wage#sthash.AKoEIAqM.dpuf

          • March 2, 2016 at 3:03 pm
            bob says:
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            I might add UW:

            Your tactics work so well, that many people in my state don’t watch Fox News (myself included). They don’t source quote many conservative people.

            For all you bring up Glenn Beck, I’ve never quoted him. For all you quote Bill O’reily I’ve never quoted him.

            I have used the CBO, I have given links to laws and studies. I have taken the WHO study and broken it down.

            I showed Libby the sections of the patriot act that Obama passed when she said they were the least controversial, with the law itself. She was wrong.

            Have you ever even looked at a law and tried to interpret it?

            Or have you relied on the interpretations of others, and labeled some, and relied on who you know type of source quoting as opposed to what you say?

            You see, even if Glenn beck were wrong 50% of the time, if someone quoted him, you would still have to prove the concept wrong, not Glenn Beck. While you democrats love this association game when it benefits you, I could just as easily go back to Obama’s Kenyan father, and Obama’s God Damn America priest that he loves so much.

            But it isn’t appropriate is it?

            And you know it. So stop doing it.

          • March 2, 2016 at 3:16 pm
            bob says:
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            Which section am I so wrong in UW?

            Show me.

            With Biden’s debate about taxes on those making $250k and his 97% of businesses comment?

            Go watch the vice president debate. He does say it.

            Am I wrong that a $15 dollar minimum wage would cost more than removing a mortgage tax break? If this business was filing under the marginal rates, and had a building worth even $500,000 dollars, at even a 5% rate they would pay $440,000 in interest over 30 years, a deduction amortized of $14,665 per year. They would be in the 15% tax range or lower after deductions outside of the mortgage. That would be $2,200 dollars. That is what Biden said could ruin businesses. That is far lower than $14,000 per employee. I am 100% correct on this hypocrisy by the numbers.

            I might not be right about minimum wage long term affects. As I said, the jury is out on that one. Either could be correct. For you to call me illiterate for looking into it is insane.

            Republicans did end segregation in larger numbers and passed the civil rights bill of 1964 in larger numbers, and they did start the 1957 act before democrats did. You can’t just say that dixiecrats in the south were the true racists and that republicans went republican in the south due to racism. If the dixie crats broke off, they certainly didn’t become republican in the long or short run. Considering more republicans voted against racism and segregation, it simply cannot be that the the south would be racist and support the republican party, no matter what spin you put on it. So I am 100% correct there. The republican party is no more racist than the democrat. You cannot prove this by making some ignorant dixie crat statement.

            The democrats did go against fed ex. It happened. The Ohio senator then said he represents Ohio and no one can comment even though he passed a federal regulation.

            In Seattle Google has already said it is Bureaucracy as to why they aren’t here:

            http://crosscut.com/2014/12/google-fiber-never-come-seattle-broadband-internet-2/

            How many circumstances like this do you suppose exist?

            Do you think it’s coincidence?

          • March 2, 2016 at 3:18 pm
            bob says:
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            Now onto the gay rights laws in Washington state:

            I read the law. The celebratory fees are the primary issue. Do you deny this?

            You just want to fall back onto homophobia as the reason why they won’t pass the law. Of misogyny. And at the same time you claim the republicans are the true party that do these types of attacks.

            It is insane.

            You are clueless UW. Not I.

          • March 2, 2016 at 4:00 pm
            UW says:
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            Bob, you are a fucking idiot.First, dolt, you didn’t address the study I linked, because you obviously didn’t read it. It didn’t look at liberal economists, moron, it looked at all modern published work on the topic. Yes, as stated there are some showing both sides, and far and away the studies showing job losses have smaller datasets and are significantly less rigorous. Of course your reply is an article by a computer scientist and a story based on anecdotal evidence that doesn’t even claim what you lie and cite as a statistic.

            Also, I find it pretty telling that along with your economic illiteracy you claim to know about conservatives and lecture people on what they want and call for, but have never listened to someone as influential in their movement as Beck.

            You’re clueless, get a grip. Explain why the vast majority of actual economists don’t believe your claim about minimum wage, and their work and studies support this. It’s also funny how you cite so many computer scientists and people with English degrees. Urs, there is debate on this, but the economic work, literature and data overwhelmingly point to my claim being correct and your opinion being wrong, and most of the work pointing your way is substandard. This isn’t just my opinion, it’s the finding in the largest comprehensive academic study on the topic, and that’s not debatable.

            Go back to trying to bully people who don’t know better, lightweight.

          • March 2, 2016 at 4:55 pm
            UW says:
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            Bob, you have such a superficial view on seemingly everything, it’s just absurd. As mentioned before, and ignored by you, the party makeup is drastically different now than 50+ years ago. Yes, more Republicans voted for the bill, and that’s where dumb people like yourself stop. In reality that’s because it was primarily a north/south issue. When you break it down on north/south lines, or roughly like the civil war the people for the bill are the modern liberals/Democrats. The Democrats against it were the Dixiecrats who ended up leaving the Democratic Party to become Republicans largely because the Democrats weren’t racist like them, e.g. Strom Thurman.

            The votes for the bill were largely because so many of these dixiecrats were in office in the south. In north/south comparisons in every category a higher percentage of Democrats were against it than Republicans, but the total number of deep south democrats was high. These people left to become Republicans. Not to mention the Democratic leadership pushed the bill and it we signed by a Democratic president. We can ignore the modern Republicans against the bill and the right-wing supreme court justices striking down parts of the bill I guess.

            Your views on everything are so superficial and so absent of any depth you seem as if you have never read a substantive book, and certainly haven’t about politics or history.

  • February 24, 2016 at 3:54 pm
    MeIsEinstein says:
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    Here we go, another “Google Compare” venture. Let this be of record that on 02/24/2016 MeIsEinstein predicted that the “Lemonade” would go sour very soon.

    • February 24, 2016 at 4:18 pm
      Agent says:
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      Google Compare at least had some serious money behind it. Even they couldn’t make a go out of Personal Auto. I pity the fool that allows them to write a policy for them.

  • February 24, 2016 at 5:04 pm
    Source says:
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    You know where lemonade comes from, right?

  • February 24, 2016 at 5:36 pm
    TheOCG says:
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    Just the name alone is enough to sink them.

    “LEMONADE”

  • February 25, 2016 at 8:41 am
    agent2 says:
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    The article says insurance sucks. To quote Butthead: “aaaaaaaah idea this sucks, dude”.

  • February 25, 2016 at 2:31 pm
    RodeoNow says:
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    I’ve read several pieces on Lemonade and can’t for the life of me, figure out what they are going to do? Is it auto? Life? GL? I mean what kind of insurance do they intend to offer? Where? When? $13 million isn’t enough $ to carry forward an office lease on Manhattan for 8 months, so where will all the ‘real’ capital come from? They have a lot of answering to do so they should put up some real plans or shut up about until they have some real plans.

    • February 26, 2016 at 9:26 am
      Agent says:
      Hot debate. What do you think?
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      Perhaps they will pay any claims in bitcoins?

      • February 28, 2016 at 4:55 am
        UW says:
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        God if you were doing a comedy bit you would be borderline genius. It would be much easier for you to just make every post something like, “You young punks get off my lawn!”

        • March 2, 2016 at 2:57 pm
          rnr_risk says:
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          I occasionally enjoy trolling the conservative pinheads that seem to populate this site — but UW is on a glowing hot streak now so I’ll just sit back and smile. You go guy!!

          • March 2, 2016 at 6:01 pm
            UW says:
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            Thanks. I was extra busy for a while so I had to take a break but I’m back for a while now. It’s fun because not a single one has the facts on their side. I know we have the majority on our side and most stay silent because it’s so annoying dealing with them but I find it enjoyable.

  • February 26, 2016 at 9:28 am
    Bill says:
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    “Lemonade’s founders promise their firm’s technology and approach will disrupt and reinvent the insurance industry business model and make insurance a ‘delightful’ experience for consumers.”

    I suspect, like most of these recent start-ups, that the “experience” they refer to is the buying experience, not the claim experience. If the latter, the delightful experience will turn into the disastrous experience when:

    1. The insurer claims rep says, “That’s not covered” or

    2. The insured says, “Hey, that’s not enough money to pay for….”

    • February 28, 2016 at 5:09 am
      UW says:
      Hot debate. What do you think?
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      Bill, it is largely the claims part, although I’m sure they will sell it through a relatively simple app.

      They plan on having people pay into a pool, and then instead of a company taking all the profit they will refund the people buying into the fund with the reserves and presumably take a smaller profit (the articles I’ve read did not state anything on profit, but it should be assumed).

      This will most likely be a terrible idea for a few reasons. Many companies barely make any profit on their premium, or actually lose a little, but as most here (should) know, make a lot of their money on their investments of premium. Refunding the majority of premium will significantly cut into their reserves to pay losses. This could be fine most of the time, until they get unlucky and have a lot of losses, or some catastrophic event resulting in mass claims/losses. Giving premium back also means they will have less money invested in the long-term significantly reducing the profit they gain on compound interest after many years. It’s almost like Warren Buffet, without the investing part.

      Ariely has done some interesting work in the past, but based on his books I don’t think this is the right direction for this company, unless he is relatively cheap. He could be good in a marketing sense, or along the lines of “If we do X, we can get unexpected result Y,” because behavioral economics can be pretty good at that.

      I will have to read more as it comes out, but I don’t see this company lasting long-term without changes based on the amount of premium they plan on giving back.

  • February 26, 2016 at 9:31 am
    Bill says:
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    Check out this video of the Chief Behavioral Officer:

    https://www.youtube.com/watch?v=GNOh243EtHc

    50 bucks says he’s never read his own auto or homeowners policy. Clueless.

    • February 26, 2016 at 3:37 pm
      Agent says:
      Hot debate. What do you think?
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      Bill, I watched that youtube and this guy could be the campaign manager for Bernie Sanders or the unsub on Criminal Minds BAU unit.

      • February 28, 2016 at 5:10 am
        UW says:
        Hot debate. What do you think?
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        It’s Obama or Millenials, because that’s everything to you, idiot. Your statement makes no sense.

    • March 1, 2016 at 7:55 am
      CL PM says:
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      If you watch that video, it only takes seconds to realize this guy has no real grasp or understanding of the insurance business. For example he talks about the very small print and exclusions in policies. Well, every state has regulations about the size of the font that can be in a policy form. There has not been “fine print” in policies for many years, at least the 30 years I have been in the business. If one needs to perpetuate a myth to get their point across, their point must have little merit.

  • September 26, 2016 at 5:55 pm
    KP says:
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    Their assumptions about why people commit fraud are wrong. Therefore the entire premise of their business model is flawed. They’ll discover this as soon as the peers begin adjusting each others claims. When it’s their money in the pool, and it starts disappearing with inflated/fraudulent claims, they are forced to raise rates as a result, and the peers start demanding answers……..they’ll become “heavy handed” very quickly.

  • July 9, 2017 at 5:58 am
    Nicholas says:
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    This company will not pay on your claims, there are very dishonest. Had fire back in September 29, 2017 and they still have not pay on damages, nor liability, and replacement claims. They work through a silly App that only works with Apple & some Android phones and you have no live customer service to talk to for your claims. They want to talk about dishonest for within.



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