This is wildly un-new. Mutual insurance companies have existed for literally hundreds of years. Oldest one I can find in 5 minutes dates to 1762, and if you include merchant insurance organizations, probably <1400 (although those probably end up looking more like equity arrangements).

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

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

Can an insurance company really claim, as Lemonade does, that:

the Service Is Available “As Is.” YOU EXPRESSLY UNDERSTAND AND AGREE THAT: (a) YOUR USE OF THE SERVICE AND THE PURCHASE AND USE OF ANY PRODUCTS OR SERVICES ARE ALL AT YOUR SOLE RISK. THE SERVICE IS PROVIDED AND PRODUCTS ARE SOLD ON AN “AS IS” AND “AS AVAILABLE” BASIS. TO THE MAXIMUM EXTENT PERMITTED BY LAW, LEMONADE EXPRESSLY DISCLAIMS ALL WARRANTIES AND CONDITIONS OF ANY KIND, WHETHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO THE IMPLIED WARRANTIES AND CONDITIONS OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT.

In other words, they are promising nothing. How then can you rely on them for insurance?

I got to "enter your name" and leaked out of the funnel. I'm willing to give up my zip code to find out how you compare to my current provider. Give me some good rates to entice me out of the rest of my data.

It looks like these are the companies that are really insuring you:

Lloyd’s of London, Berkshire Hathaway’s National Indemnity, XL Catlin etc.

Basically they are buying a policy from one of those companies adding 20% and selling it to you.

A insurance company works by spreading risk over a large area. By selling everything in NY they are increasing their correlation which raises risk. One of the reasons for the sub prime crisis was no one expected housing to fall in all markets at the same time.

I happen to have been looking for renters insurance recently. I signed up immediately after reading the insurance policy terms. They are about as generous as the terms offered by Liberty Mutual, but LM wanted to charge me more than 3x as much, and I had a strange and frustrating conversation with a LM agent that left a bad taste in my mouth. Charity or no charity, it's a great deal.

However I made two mistakes. First, I selected personal property coverage that was probably too low. Second, I used a throwaway e-mail address to get my quote. I see no option in the app to modify either one. As I put in a support request for each item on the website, it occurred to me that I am probably screwed if anything goes wrong with my policy or claim. Yes, I am aware that there is an emergency hotline. But what happens if I'm no longer in an emergency? Insurance payouts can take a long time -- am I supposed to only ever interact with the company through a little "Help" popup on their website while I'm waiting for my check?

I'm also wondering: why is the actual interface to the application only available in a mobile app? What happens if my phone is damaged? Will I be forced to call the emergency hotline for even minor administrative tasks until I get a new phone? Is it that hard in 2016 to support web and mobile simultaneously?

Finally, I am sick to death of patronizing "I'm your friend" interactions with applications. The whole idea of "Maya" the robot assistant is goofy. It feels like a grown-up version of Smarterchild, and I get the same uncomfortable feeling "interacting" with Maya that I do when I'm trying to explain to a cheerful robot on the phone what I'm calling about.

How is this more "P2P" than other insurance companies are? Non-profit, yes, but the mechanism seems to be the same. There is still a central pot everybody pays into.

I would like a non-profit that just pays back the spare money even more. I do not know how this would work with regulations. I guess in Germany this could be done through a "Genossenschaft", which Wikipedia tells me has an US equivalent called co-op. Would this actually work?

Edit: Realized that you could just grant discounts as there cannot be a profit anyway. Would be awesome to see several companies with the same model, first competing on prices and ultimately the percentage of the fixed fee.

This looks awesome I might check it out.

But the "P2P" branding is likely going to be confusing to a lot of people. In fact even after reading the explanation I still don't understand the peer to peer model in this context and I know what Peer to Peer means.

I read some of the comments about the funnel and I set out to try it myself.

There are 8 steps to get a quote

1. First and last name 2. Full address 3. question (renter/owner) 4. roomates/alarm 5. current owner of insurance? 6. Jewelry over 1000$? 7. email, birthday 8. Quote, which seems highly generic and could be done without 6 of the 7 previous steps.

I can't even imagine the conversion rate from just checking it out to paying customer, it can't be too high at all (outside the founders circle).

ZipCode -> Quote should be the only step. The rest should happen after you convinced me about your value. By the way, don't email thisisridiculous@gmail.com, it's not really my email.

Daniel from Lemonade here. Totally understand how P2P can be confusing as a term. What we mean by it is that we use each group's premiums to pay their claims, with leftover money going back to the group's common cause. To us P2P is a shorthand for: 'it's not our money'!

From what I can tell P2P means it's essentially an insurance co-op. It's definitely not a world first - I had renters insurance over 10 years ago that worked this way (except I got actual dividends instead of donations in my name).

If they pay claims super fast and earn no money saying "no", how, as a customer, can I be sure other customers do not make fake claims and decrease my share of leftover money? Or even make Lemonade unable to pay claims?

>A transparent 20% fee to run everything

how does that compare with the profit margins of a traditional insurance company?

Why not give the leftovers back to customers? There's incentive in that to be a lower risk client.

If anyone wants to see exactly what goes into an insurance product, it's public info (including loss ratios.)

In this case, you can look up the public filing at https://filingaccess.serff.com/sfa/home/NY (search for Lemonade as the company)

or here is a public dropbox folder. https://www.dropbox.com/sh/dc6daybikir92l1/AAAWWT6J0DfsPG7nA... of it

Expected Loss ratio is 50%.

Pricing structure is pretty standard.

So I tried out Maya and I just gotta say, great stuff! You ask for the bare minimum stuff, deduce the rest yourself, let the user play around with the numbers and give them an instant quote. Insurance is something a lot of people find intimidating and hard to approach as customers, and you have made it as simple as possible, explaining each item in an easy-to-understand way, letting the user know exactly what they signing up for, how much they are paying, and what they are getting.

Impressive! Good luck to you guys.

Aren't all insurances in theory P2P? My naive understanding is that the insurance companies basically collect a lot of money from a large number on people, and then pay it out when needed? Basically, think of them as managers for the money. In addition they try to make the money work by placing bets on a lot of things and hope they make more than 1X.

Not trying to poke holes, but this sounds so interesting to me. This sounds similar to syndicates on the investment side.

A better -- but still not really P2P -- example of social insurance is https://wearesosure.com (UK mobile phone only for now)

With So-Sure you link up with friends and are bonused if nobody claims. Of course that means nobody links with that friend that always loses their phone, which in theory reduces their risk and pays for the bonus.

So... what are the supported causes? What is the criteria for a cause to be qualified for support?

There are charities and causes I do support and there are those that I don't. There are charities that oppose each other in their stated goals as well.

I see a section that talks about becoming a supported charity, but nothing about criteria or who is already in.

Hmmm. I think the interaction where it says that it is not yet available in my area and to try again with a New York address could be improved a little.

Go ahead and let me enter in my information and put me in some sort of potential new location queue-- get enough people near / around me, and you can start to decide where to support next.

Just a thought.

Not sure it's the first.

At least, I know of https://heyguevara.com/ is a P2P car insurance provider in the UK that is registered with the FSA and licensed to provide insurance products. They've been operating for a couple of years now.

Are you guys getting a tax write off for the charitable donations from the surplus pool? If so, wouldn't that give Lemonade a financial incentive to decline payouts in favor increasing your bottom line and therefore negate the idea of having no stake in paying out legitimate claims?

I don't follow how this is P2P, and unfortunately it seems only available for New York zip codes?

The best form of insurance is self insurance, if you have some money on the side. Instead of paying someone to insure the risk (and get rich on top of the rent), I allocate a reasonable amount (5 figures) and put it on the side, and take the risk on myself.

I have to say, I'm pretty excited by this. Mutual insurance companies have existed for a good while, but they're not easy to find. Having one that's married to great tech definitely makes me want to use it.

Honestly having to give the page all of my information before even being able to see a price or actually really even find out what it was selling turned me off.

Didn't bother finishing.

That might be a cut and paste TOS, with a little CTRL-H for flavor. Otherwise, that TOS hopefully is intended to apply to the website only.

If anyone has gotten far enough with them, I'd love to see their actual insurance contract. I'm too lazy to go pull their state filings.

EDIT: Here's the part that troubles me more -

"GIVEBACK ... our stated intention is to calculate the amount of leftover money by subtracting from the group’s collective premium, our flat fee (currently 20%), the costs of claims, a “rainy day fund” and other insurance expenses like reinsurance – and giving back what’s left (up to 40% of the group’s premiums). ... "

That 20% "flat fee" is about 8% less than the industry standard expense ratio. That's pretty aggressive expense reduction, to the point where I'd wonder if they'll run out of money, or if they plan to write only the most preferred of preferred risk. I know it reads as though a "rainy day fund" and reinsurance are separate items, but a rainy day fund only happens if you run a surplus, and I'd be shocked if anyone is reinsuring this block at reasonable rates unless, again, (very) preferred risk - at which point you wouldn't want or need to reinsure.

I know it sounds odd, but as a startup, I'd be happier as both a potential customer and potential employee (both very hypothetical) if they called it 30% and undershot it. You don't want to run out of money. It's not an industry where you can just fire some employees unless you're really overstaffed, since service level declines drive complaints, and enough complaints and suits put you out of business.

EDIT 2: All of that said, I'm rooting for these guys. This industry needs modernization pretty bad. If they can make their 8% back from process and tech optimization, that's great. I'm not trying to be negative, I really want them to succeed.

There's a difference between insurance and reinsurance. It looks like they're only reinsured through those companies, but the policy itself is underwritten by Lemonade.

Reinsurance is basically insurance for the insurance co, for instance if a hurricane hits NYC and wipes out all of their policyholders at once.

(It's a bit complicated because there actually are many insurance co's that only sell insurance underwritten by a third party (although they may be able to offer lower price than buying from the third party directly because of how they target their customer base or handle claims), or sell insurance strictly on commission and outsource servicing claims, and there are varying forms of reinsurance that cover everything from huge tail risks to flat percentages of claims, or exotic circumstances like your corporate HQ burning down or massive lawsuits.)

They're not adding 20%, they're charging you a flat 20% and then paying for the policy on the back-end.

In that sense, it's like a buyers club for insurance. Lloyd's isn't insuring every Lemonade customer individually, they're insuring the entire Lemonade business, which with enough buy-in becomes a very diversified risk pool.

Their street address is the Goldman Sachs building.

And Geico's overhead is closer to 15%.

So... do what you want with that info.

No, this is absolutely wrong. The housing crisis happened because people did not appropriately price risk and subprime mortgage bonds with poor underlying mortgages were rated highly and then leveraged 30:1 by banks like GS and BoA. An extra billion dollars in insurance exposure to the greater NY area will not precipitate the another financial crisis.

That doesn't sound right -- a claim should be paid out or denied based on the veracity of the claim, not on the profit motive of the company. Sure, a for-profit company has extra incentive to vet claims, but so does Lemonade (since they dont want to be swindled).

Traditional insurance companies make their margins on the cash they have to hold on hand.

... extra profit donated? Why would I choose that over lower prices?