Why is Lemonade insurance so cheap? Last year, I had a few clients tell me “I don’t want to spend the time underwriting my home, I’m just going to use Lemonade”.
Today, Lemonade‘s stock is 90% less than a year ago. Why? Because they made it fast, easy, and cheap for people to get insurance. They relied on bots and an algorithm to underwrite homes versus expert advisors, experienced underwriters, and classic actuarial methods. Now their “Loss Ratio”, or the difference between premiums collected and the amount paid on claims, is growing unfavorably fast and draining money out of the business.
Similar to the failing Zillow, they are attempting to remove humans from the equation and disrupt an industry with robots.
The worst part — if you look at a Lemonade policy, it’s stacked with exclusions and coverage limitations. Certainly not in the best interest of the policyholder, and as Lemonade’s business declines, their customers are going to get the short end of the stick.
I anticipate we’ll see more venture-backed tech businesses attempting to disrupt all industries, in addition I’m sure these hockey sticks will continue to flip.
I’m placing my bet on insurance experts and human relationships *supported by tech*, not some flashy website with a chatbot and 800 number. Lastly, I’m all about making things easier. But I caution anyone looking to protect their assets, family, or dreams with a tech-only approach.
Why is Lemonade insurance so cheap? Written by Tyler Crawford, www.fullsteam.io
Moreover, about Lemonade: Lemonade Insurance mainly offers insurance plans to homeowners and renters that are easily accessible through a digital platform.