Lemonade Proposes Open Source Insurance Policy for All to Change, Adopt

By | May 21, 2018

  • May 21, 2018 at 8:11 am
    Brian says:
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    More self-promotional bluster from Lemonade. They will learn why the HO3/HO4 policy is written the way it is, due to many legal decisions over the years. Once the surface, all they’ve done is written the ISO form using plain English (doesn’t really merit screaming, “Look at me! I reinvented insurance!”). Also, this is filled with coverage landmines, which is why it hasn’t been done before. There isn’t an agent, underwriter, or claims person that hasn’t wished the policy language was more straight forward. But telling someone you will cover “fire,’ for example, sounds simple.But does that mean you will cover hostile fires, arson by a spouse, or a cooking fire caused by the insured? What about a smoldering fire that never ignites but causes smoke damage? Or the resulting water damage from a fire department extinguishing the fire?

    • May 21, 2018 at 1:23 pm
      Einstein says:
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      Yeah, all very true and excellent points but you forgot that Lemonade isn’t in the business to make money “…but to give back to the community…” so their policies won’t have any exclusions at all and when you don’t have any exclusions there is nothing to worry about!

      • May 21, 2018 at 1:31 pm
        Bill says:
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        The policy in question doesn’t have many exclusions because it only covers about a half dozen or so perils and they come and go as you read the policy. First there are 6 perils plus some weird statement, then later there are only 4 perils listed, then there are 6 again (without the weird statement the second time). For the old timers here, this is Ted Mack’s Original Amateur Hour.

      • May 22, 2018 at 1:47 pm
        Jack says:
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        Einstein- “not in the business to make money”. LMAO. 20% commission looks pretty rich to me.

    • May 21, 2018 at 4:11 pm
      TxLady says:
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      Interesting that their HO4 language states a max per year that they will pay, not per occurrence.

  • May 21, 2018 at 1:22 pm
    Richard says:
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    Sheesh. First off this is a solution to a problem that doesn’t really exist. Reality is that insurance contracts are not designed to be read – they are designed to be litigated. Fix the litigation process and then simplify the contract. This is a gimmick pure and simple. It is designed to look cool for the current crop of new bohemians (are you cool like me? – I bought a lemonade policy!). The genius in the PL space is better use of 3rd party data in predictive analytics and multi-layered scoring/tiering. They may have cracked some of this nut – but it is far too soon for even them to tell. Shaking my head……..

  • May 21, 2018 at 1:45 pm
    Agency says:
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    This is more of a “we are better than you” mentality and because in their mind (or his mind), everyone should follow what they do. This is typical tech culture, furthermore they inject their politics into policy language (such as in limited coverage for guns and other non-sustainable nonsense). These people don’t believe in freedoms or the marketplace, they don’t say it out loud, but if you don’t think at they think, they will try to belittle you to no end.

  • May 21, 2018 at 1:56 pm
    Bill says:
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    Lemonade has a LinkedIn post about Policy 2.0 with about 100 comments. Almost all of the comments are enthusiastic. They are almost all from people who appear to know nothing about insurance. Lemonade’s hype and hyperbole appeal to the ignorant and uninitiated and I don’t mean that in a derogatory way. They are preying on people who are willing to drink the Kool Aid…I mean Lemonade.

    Here is a tweet from a venture capitalist that explains part of this phenomenon:

    “Most interesting observation after 3 months as VC is how critical I am of things I know something about and how excited I get when clueless.” – Villi Iltchev

    Policy 2.0 is a stripped down renters policy, far worse than even the old HO-1 or the HO-8. In fact, if you go back to the 1943 New York Standard Fire Insurance Policy (apparently ahead of its time since it only had 2 pages) with an Extended Coverage endorsement, THAT had more coverage than Policy 2.0.

    • May 21, 2018 at 9:17 pm
      County Line says:
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      Anyone with market sense understands PRICE has always been a hot button to buyers, no matter what the product. Putting price first wins buyers by creating the illusion a cheap product performs equal to (or better than) costlier competitors. Naturally this relies on willfully ignorant consumers to play the game. The game will go on for a season, but every time such scenarios eventually collapse.

      Lemonade’s target market is the tech-centric generation, which is largely young-ish and inexperienced with the impact of contract language on their lives. That said, Lemonade’s clientele is in for a wake-up call when their coverage fails to perform or pay claims per the buyers wishes. In fact, “wish” is the operative word here.

      Despite how wishfully naïve Lemonade’s buyers are, we know this about them: They are highly networked via social media, and they have no problem airing their grievances. As Lemonade’s denied claims pile up, expect to see a social media firestorm of angry clients burn down the house of cards Lemonade is building.

  • May 21, 2018 at 1:59 pm
    Bill says:
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    P.S. I wish the insurance industry media would show more journalistic integrity and not just regurgitate every press release they get as “News.” This isn’t news, it’s propaganda from a player with allegedly very poor loss experience who can improve that by replacing a very good policy with a far inferior form that covers less.

    • May 21, 2018 at 3:37 pm
      Andrew G. Simpson says:
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      P.S. Contrary to your insult, we do not “regurgitate” every press release. Far, far from it. In an age when solid journalism gets little support, we are proud of our work. When a company –insurtech or not— does something interesting, we think it’s worth reporting on. Sorry you don’t like that this includes reports on some firms you do not like. Many people have found it interesting. Your issues are with Lemonade, not with the insurance press. Despite your insult, you sure as heck appear to be following everything they do closely. You are welcome that we help you keep up with them. We promise not to force you to read any more articles on them:)

      • May 21, 2018 at 10:01 pm
        Craig Cornell says:
        Hot debate. What do you think?
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        I would back you up on that one, Andrew.

        But IJ publishes a whole bunch of marijuana and Climate Change stories that have no direct connection to insurance. And every single article published on these issues take the leftist side of the equation: pro marijuana and the position that man-made Climate Change is real/dangerous/ something to be addressed with massive public policy measures.

        The truth is that marijuana knowledge over the past 10 years has expanded and much of it is not good news for users, but never have I seen an article on those findings in IJ. Similarly, there is much recent, 2018 news on Climate Change that is very good news from the standpoint that the connection between man and a changing climate is more and more uncertain, and the likely damage from rising seas far less serious than science predicted in the past. This is research published by legitimate climate scientists in respected publications like the journal Nature.

        But again, never is any of this in the IJ. And you can make a strong case that the good news on Climate Change is very relevant to insurance people.

        If you want to know why people believe in Fake News, it isn’t just lying in the media (See “animals” last week). It is the bias to ignore the truth when it doesn’t support the agenda.

        • May 22, 2018 at 9:04 am
          Captain Planet says:
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          Craig,
          Does the Insurance Journal hurt your feelings? Like Andrew said, they promise not to force you to read those kinds of articles anymore. That’s about as much of a safe space as you’re going to get.

      • May 22, 2018 at 8:56 am
        Brian says:
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        Andrew – IJ is very topical and an asset to stay in touch with what’s happening in the insurance world. But I think it’s fair to criticize the reporting of this article. The source is Lemonade, the quotes are from Lemonade’s prepared remarks and blog, and there is no critical analysis or historical context of what they are announcing (Bill mentioned a few points about coverage above). One example,”Each Policy 2.0 will be unique and dynamically-generated, based on the choices the user made.” It sounds trendy and new. But that has existed for decades, each time a customer applies for their insurance or makes changes to coverage limits, endorsements, deductibles.Someone reading this with no insurance background would just assume it had never been done before.

        • May 22, 2018 at 12:08 pm
          Andrew G. Simpson says:
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          Thanks or your thoughtful reply. I will refrain from explaining our reporting after this. But suffice to say we are an insurance publication and assume our readers have some insurance knowledge and can read with insurance implications in mind. We do not publish for consumers or the general public. We appreciate it when insurance professionals contribute comments like yours that expand on the insurance aspects of articles. That way we can all be educated. To report on something is not to endorse it or indicate agreement with it. In my view, this story was more about the “open source” process Lemonade has undertaken rather than the content of any particular policy the insurer may or may not offer now or in the future. You can respect it, ridicule it, be indifferent to it– whatever. But at least now you know about it. We have a small staff (perhaps you noticed that most readers expect journalism to be free these days) and we attempt to cover a lot of ground while facing deadlines. There is always more to a story; we have to make judgments on where to spend our time. Waiting for an insurance “expert” or organization to return a call or email, which rarely happens swiftly, only to then have them ignore our request or decline to comment, is not always the best use of our time, especially on a minor story. We do originate and expand upon many, many news stories (not to mention the many we send to the trash) and we are always open to expert contributions that add insight and value. But we honestly do not have resources to provide analysis or in-depth reporting on everything. That’s where you– our readers– can help– by bringing your experience and expertise to the comment section, or contributing articles that analyze and inform (not political diatribes). So instead of blaming the media and complaining that the Lemonade story or another did not provide enough “analysis,” we’d like our community of readers with expertise fill in the gaps for other readers. I regularly plead for commenters to stay on topic and keep their comments civil and related to insurance. I have not been as successful at encouraging thoughtful comments as I’d like. Thanks for tolerating my rambling. I will get back to work now.

          • May 22, 2018 at 12:50 pm
            sal says:
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            Andrew–

            for what it’s worth: Thank you for all you do. It’s not easy bringing us articles of the caliber you do, that are meant to only enhance our knowledge of our chosen professional, and it’s definitely not easy babysitting us in the comment section.

            I do sincerely appreciate it.

      • October 1, 2018 at 2:36 pm
        Bill says:
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        “you sure as heck appear to be following everything they do closely”

        Someone has to. And someone has to ask probing questions and offer counterpoints. It’s the rare journalistic inquiry that I don’t respond to within 24 hours or less.

  • May 21, 2018 at 9:21 pm
    Craig Cornell says:
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    Like many in insurance, I keep a close eye on InsureTech.

    But I have yet to see anything truly disruptive for insurance agents or brokers. It may happen. But maybe not.

    My own, personal experience is this: when offered tools to lower insurance costs, most businesses would rather not do it themselves. They don’t trust themselves to do it properly and so they look for a pro to take it on.

    There are exceptions, the small (very small, usually) business owner who views workers compensation as a commodity and is comfortable buying on-line. But most feel the commission included in the premium is likely offset by the savings realized when a professional insurance person is involved.

    This may be a stunt by Lemonade. If so, it is a good one, getting them good press with people who aren’t in insurance. If it is not a stunt, credit to them for trying to simplify policy language made more and more convoluted by lawyers, causing the public to become more and more cynical about an insurance company’s ability to deny claims based on obscure policy language.

  • May 22, 2018 at 3:12 pm
    JoeHarrington says:
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    However it turns out, the Lemonade 2.0 initiative is a valuable exercise in reminding people that insurance is not so much a commodity as it is a risk-sharing arrangement among people.

    To the extent non-insurance people are engaged in developing or customizing insurance contracts, they may learn or be reminded why certain concepts (e.g., adverse selection, coinsurance) and obscure provisions are integral parts of risk-sharing.



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