While insurance companies are not the most beloved, they for the most part, meet their obligations by paying claims, as promised. We’ve all heard the stories of insurance companies unfairly and unreasonably denying claims or giving claimants the run-around. And most likely have experienced this ourselves. I’ve definitely experienced this. What most people don’t talk about is all of the times they’ve successfully had insurance claims approved for Doctor’s appointments and services, medications, dental appointments, auto accidents and more. My unscientific guess is that 98%+ of insurance claims that I’m entitled to have been paid.
Yet, what always sticks out in our minds are the times where we’ve had to battle successfully or unsuccessfully, with insurance companies or where insurance companies have faced regulatory fines, forced premium reductions or lost lawsuits. And this brings us yet again to Lemonade, which continues to be one of the most interesting insurance stories while maintaining the usual high tech promise of great rewards, while not actually being profitable. High tech company valuations are a subject for another day.
Lemonade’s premise is that they can provide insurance at lower premiums through better use of data using Artificial Intelligence (AI) and doing so on a transparent basis. The insurance industry really does need more transparency. What is intriguing, is how far Lemonade has to go on showing that they can run a profitable insurance business. Insurance companies must maintain long term profitability so that they can pay claims at sometimes very distant points in the future. For example Lemonade’s reinsurance partners paid $3.53 for every $1 in premium they received from Lemonade in the first quarter of 2018 which is unsustainable. It’s the usual InsureTech story, insurance needs evolution, not revolution. For an in-depth look at Lemonade, check out: Lemonade’s Cards.
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