In its latest effort at self-promotion, industry “disrupter” Lemonade has posted an article on multiple web sites. Here is the article from one source:
“Lemonade: World’s First Live Policy”
Below are some excerpts from the article and some observations and questions of my own.
“Then, customers would need to pay for some changes, and probably get a new policy sent to them in the mail (snail mail, of course). That’s where the red tape and long wait times come in….”
So, the changes listed in the article that Lemonade will allow their insureds to make without customer service assistance wouldn’t in some cases result in additional premium? And what carrier mails an entirely new policy for changes as described in the article? This is nonsense and it is not an accurate nor an honest statement.
“As far as we know, no other insurance company allows its customers to modify their coverages or even cancel their policy on their own.”
This is disputed in one comment at the bottom of the article linked above. More important, if anyone actually CARES about the customer, why would they want to facilitate an untrained person to make a change that, unbeknownst to them, could create a serious exposure gap? So, Lemonade would allow, with no questions asked and no intervention by customer service, one spouse to remove another spouse even if both are named insureds on an insurance CONTRACT?
So, Lemonade would allow, with no questions asked and no intervention by customer service, one spouse to remove another spouse even if both are named insureds on an insurance CONTRACT?
The insured, without question or counsel, can remove a landlord as an additional insured on a policy even if the lease contractually requires them to be covered? How many insureds read their leases or insurance policies? How many would know the potential liability they’re incurring? Do the people at Lemonade understand this?
This is why knowledgeable insurance agents serve a purpose. Most insurance agents are required by law to pass examinations and engage in state-approved continuing education in order to provide counsel to consumers for these types of decisions. How is a consumer who knows pretty much nothing about insurance supposed to make coverage decisions on their own without the training that state regulators require of agents? What do regulators think about this practice?
“Even if you buy renters insurance directly from the likes of GEICO or Progressive, the only part that’s direct is taking your money and sending you a policy. Everything else requires customers to contact customer service — which we all know can be… painful. That sucks.”
What can be far more painful is the inability of an uneducated, ill-informed, and unsuspecting consumer to contact customer service in order to obtain the counsel and advice of a properly trained and knowledgeable insurance agent.
It sounds like Lemonade is adopting a practice that saves THEM a lot of time and lessens THEIR need to hire competent insurance advisers and SELLING it as a benefit to consumers? In other words, Lemonade is reducing their workload, increasing consumers’ risks of loss, and making their customers thank them for it. On top of that, since they are not intervening in the insured’s own bad judgment, are they also insulating themselves from E&O claims such that their customers will have no coverage under either their own policy or Lemonade’s E&O coverage?
Lemonade is reducing their workload, increasing consumers’ risks of loss, and making their customers thank them for it.
Who is the real beneficiary here? I think most insurance professionals can answer that question. Caveat emptor.
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BREAKING NEWS!!!
I’d like to announce that I’m going to revolutionize the healthcare industry with my new pharmtech company I call Strychnine. Consumers will be able to choose and prescribe their own drugs and dosage. After all, with informative online resources like WebMD, who needs doctors and pharmacists anymore?! Fast, easy and cheap is finally coming to healthcare!!!
Bill Wilson
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Bill – Love your weekly commentary. With regard to Lemonade, I don’t think this is worth getting crazy over. Yea, I agree, I’m a DIY sort of guy but I doubt I’ll pick up a scalpel anytime soon to remove my appendix or write my own will, but there are people who will, and that’s okay! I think the disruptors in any industry serve a purpose – they force the establishment to take an inner look at themselves, their products, their processes, and their delivery of products and services. Customer preferences are changing and those that adopt will succeed. In my opinion, the larger question for a Lemonade and insurtech firms like them is their solvency and the final product the customer does get. If a startup can’t pay claims or doesn’t pay claims down the road, the entire insurance industry will get a black eye. Minimal underwriting, minimal documentation and fast fast fast may lead to an insurers ultimate and quick destruction simply through adverse selection.
Time will tell (obviously) but there’s a lot to learn from these distruptors and what consumers think of them and the establishment.
Thanks for contributing to the dialogue on this and so many other good subjects!
I think their tools can be very useful, but I don’t see any interested in truly protecting families and organizations from loss. They appeal to the baser instincts of ease, speed and convenience. When everything you own and a big chunk of what you earn is on the line, the public need to be told that fast, easy and cheap are not realistic or desirable goals anymore than they would be when addressing your physical health. From that standpoint, I see many of these startups as dangerous, though admittedly maybe no more dangerous in some ways than our own “Flo” and gecko who have brainwashed consumers into thinking that nothing matters but price.
I think you hit the nail on the head – established insurers like Geico, Progressive, and eSurance (Allstate) are always pitching, fast, easy, cheap – consumers believe THAT is what insurance is. Those brands have brainwashed the buying public, but agents and brokers haven’t done such a good job at pitching value, expertise, or strategy, either. We’ve played into the same commoditized hand of lowering prices. Lemonade only accelerates the commodity problem and until enough people say that they’ve been burned will something change. I don’t think the driver here is insurance provider any more – it’s the consumer and their preferences and it’s happening across a lot of industries, not just insurance.
Sadly, you could be right on all counts. Too many agencies train and educate their employees in an age of mandatory CE via education that is fast, easy and cheap. We overly rely on comparative raters so that, when quoting someone, we all too often just produce a list of carriers and premiums with little thought as to how their products and services match customer exposures. When it comes to nutrition, we don’t let our children be the drivers of what we feed them. Otherwise, they’d grow up on a diet of chicken nuggets and candy. We need to do the same for insurance buyers and that will require changing what we do and how we do it and educating the consumer at the grassroots level.
Original Lemonade article on Medium:
https://medium.com/@shai_wininger/introducing-the-worlds-first-live-insurance-policy-26abe0d7642d
My response on Medium:
https://medium.com/@InsuranceCommentary/quote-then-customers-would-need-to-pay-for-some-changes-and-probably-get-a-new-policy-sent-to-de8b46411ddb
Another poster’s response to my response:
https://medium.com/@_nickcorona/you-sound-like-youre-saying-what-you-re-saying-because-you-have-a-direct-conflict-of-interest-3274de819cc4
My response to the poster’s response to my response to the Lemonade article:
https://medium.com/@InsuranceCommentary/nick-responding-to-your-comments-below-9b9e8f6dfc87
Question for anyone who has gotten a quote from Lemonade? Do they offer flood insurance?