Insurance Academy

I Kind of Like Policy 2.0

By Patrick Wraight | June 6, 2018

If you’re like me, it’s pretty easy to get into a groove with work. Once you get used to a job, you kind of feel out the schedule and the flow. You start to figure out what works for you and what doesn’t. You get comfortable.

Lately, companies are trying to get us out of our grooves (or maybe ruts?). Young startup companies, like Lemonade, are calling themselves disruptors. They think that they are going to revolutionize everything in insurance. Of course, they are being met with the requisite grumpiness from an industry that prides itself on stability, history, and tradition.

I’m guilty of it. Maybe not guilty, but certainly I fit in with the skeptics that look at the blog posts and “news” videos that Lemonade puts out with the proper amount of scoffing, disdain, and down-my-nose glances. (actually, it’s more of an over the glasses look, but since I don’t wear glasses, I needed another picture.)

However, after reading their new Policy 2.0 and thinking about it, I think I like it, at least I like it in principle. I like it before the regulators and lawyers get their hands on it and (honestly) I’ll like it after the regulators and lawyers take it apart and put it back together again.

Let me see if I can clearly (and relatively quickly) make my point.

We can make things easier, if we want to work at it.

They are on the right track by using simpler language. Just because they are using simpler language doesn’t make it invalid. They are actually applying part of the same principles that the rest of us apply when we analyze policies. We look at the words in the policy and ask ourselves these questions.

  1. Is the word defined in the policy? If it is, we use the definition in the policy.
  2. If it isn’t defined, is there a standing legal definition that we can use? If there is, we use that.
  3. Is the word a technical word that has a technical definition? If it is, let’s get that definition.
  4. Finally, can we just use the common usage of the word? That’s where Lemonade appears to be landing right now.

The problem that they’re going to have is that they use such common language, and have foregone so much of the formal language, that they may face court challenges. The current version of their Policy 2.0 always calls contents (personal property) “stuff”, except for one time where it refers to “things”. That’s the kind of thing that ends up creating a conversation in court.

I figured out where their policy has some merit. It is designed to be easy to change coverage, and certain terms. Their policy 2.0 is no longer the contract of adhesion that current policies are. If you aren’t aware, a contract of adhesion is a contract where we don’t get to negotiate a lot of the terms. We offer our customers a policy and very limited ability to change it. We have homogenized certain policies so much that we offer the contract as is.

This Policy 2.0 is set up (right now) to provide very limited coverage (for probably almost no premium) and the insured can choose to add covered perils as they choose (for some extra premium).

But who is going to help them through that process of deciding how much coverage they need?

We can help the consumer, if we want to listen to them.

Lemonade’s (and the other app-first agencies and carriers) biggest point is that they’ve been listening to what people want. They have learned who their customers are and what will make them happy. They understand that generations are more comfortable today in the digital space than any generation prior. By the way, the next generations will be even more comfortable in the digital world (and maybe less comfortable in the real world).

We have an opportunity right now to change so that we can meet our customers where they are and not make them be where we want them to be. This generational change is totally natural. My great-grandparents were born, lived, and died in one county in upstate New York. My grandparents were urban dwellers, who brought their families into town. My parents were urban dwellers, but also a little more mobile so we spent more time in other cities and towns. You get it. Generations all change incrementally.

If we are going to continue to serve our customers, we really need to quit trying to treat them the way we treated their parents. We need to figure out how they tick. We need to learn what serving them looks like and quit griping about how they need to grow up. Here’s some news. They have already grown up and they made insurance companies after their image.

We can disrupt ourselves, if we want to wake up.

This is not the end of the changes that are coming. Lemonade and their Policy 2.0 are just the beginning. It doesn’t matter if they are successful. It doesn’t matter if they go broke (become insolvent), are bought out by a bigger company, or simply become irrelevant. Sorry, Lemonade, but those are all real possibilities.

If Policy 2.0 never hits the streets, someone else is watching and will do it better. If Lemonade becomes insolvent and is written off as a blip on the radar of history, someone else will come along and take up their banner, and do it better.

Why wait for that to happen? Why wait until someone comes along and forces you into the present (and the future)? Why not just find a way to bring yourself into the front edge of the changes? Maybe you don’t know how to do all this. I get that. I don’t know a lot of things. I get people to do the stuff that I don’t know. It really is that simple. Come up with a plan, find the right people, and execute that plan. But, for the customers’ sake, will you please wake up and serve them?

Lemonade, keep it coming. I’m willing to see how far you come and if nothing else, I may need to learn your policy and teach it to my peers.

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