Anybody use Lemonade Homeowner's Insurance?

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workPsy
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Anybody use Lemonade Homeowner's Insurance?

Post by workPsy » Mon Mar 12, 2018 11:27 am

Hi all! Thanks in advance for any information, and for contributing so much great information about homeowner's insurance to the forum.

I'm a first-time home buyer, and investigating homeowner's insurance. I am considering the go-to options: State Farm, Progressive, etc. Additionally, I'm looking into Lemonade [https://www.lemonade.com/], which adopts a "peer-to-peer" insurance model. Reviews are widely positive, quotes are notably lower for equivalent coverage, and I appreciate a company disrupting what is a rather stale industry. However, while other options feel "safe" because they have long histories, this one feels a bit riskier simply because it's unfamiliar.

So I'm posting to ask if anyone has experience using or researching Lemonade as an option for homeowner's (or renter's) insurance. If so, please enlighten me about your experiences!

sport
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Re: Anybody use Lemonade Homeowner's Insurance?

Post by sport » Mon Mar 12, 2018 11:48 am

Keep in mind that if you have your auto and HO insurance with the same company, there may be a "multi-line" discount on both of them. For example, my HO insurance cost is $759. However, that includes a $306 home/auto discount. Similarly, my auto insurance is less expensive because of the HO insurance.

workPsy
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Re: Anybody use Lemonade Homeowner's Insurance?

Post by workPsy » Mon Mar 12, 2018 11:53 am

sport wrote:
Mon Mar 12, 2018 11:48 am
Keep in mind that if you have your auto and HO insurance with the same company, there may be a "multi-line" discount on both of them. For example, my HO insurance cost is $759. However, that includes a $306 home/auto discount. Similarly, my auto insurance is less expensive because of the HO insurance.
Good call here. Lemonade has highly competitive rates, so the difference might balance out. But this is surely something to consider!

Loik098
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Re: Anybody use Lemonade Homeowner's Insurance?

Post by Loik098 » Mon Mar 12, 2018 11:58 am

Thanks for asking this. The company that manages my HOA (First Service Resedential) sent me a robo-email recently to tell me that they had "partnered" with Lemonade and wanted me to start a quote.

I had blown off the email (to be honest, because the company name "Lemonade" sounded hokey to me), but might consider them at my next annual policy revisitation if others have had good success.

alfaspider
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Re: Anybody use Lemonade Homeowner's Insurance?

Post by alfaspider » Mon Mar 12, 2018 12:49 pm

workPsy wrote:
Mon Mar 12, 2018 11:27 am
Hi all! Thanks in advance for any information, and for contributing so much great information about homeowner's insurance to the forum.

I'm a first-time home buyer, and investigating homeowner's insurance. I am considering the go-to options: State Farm, Progressive, etc. Additionally, I'm looking into Lemonade [https://www.lemonade.com/], which adopts a "peer-to-peer" insurance model. Reviews are widely positive, quotes are notably lower for equivalent coverage, and I appreciate a company disrupting what is a rather stale industry. However, while other options feel "safe" because they have long histories, this one feels a bit riskier simply because it's unfamiliar.

So I'm posting to ask if anyone has experience using or researching Lemonade as an option for homeowner's (or renter's) insurance. If so, please enlighten me about your experiences!
I don't think the "peer to peer" model is anything new. That's what a mutual insurance company is. The idea is hundreds of years old.

https://www.investopedia.com/terms/m/mu ... ompany.asp

The only thing that looks unique about Lemonade appears to be that instead of a policyholder's dividend, they give the remainder to charity.

SimonJester
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Re: Anybody use Lemonade Homeowner's Insurance?

Post by SimonJester » Mon Mar 12, 2018 12:59 pm

Here is a good objective article on the company and their product...

https://insnerds.com/lemonade-hype/


I would have some concerns on their longevity, their ability to handle a significant catastrophic loss (think hurricane, wile fire, etc), and how well they would goto bat for you in a legal proceeding.

When comparing insurance options over the years I found its not always apples to apples when looking at quotes and the discount insurance companies offered lower quotes because they often had lower coverage limits and additional exclusions the other insurance companies did not. Once you matched coverage limits and adding in things they were excluding for most of my quotes have been very close to one another. So watch out for this...
"They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety." - Benjamin Franklin

z91
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Re: Anybody use Lemonade Homeowner's Insurance?

Post by z91 » Mon Mar 12, 2018 1:46 pm

SimonJester wrote:
Mon Mar 12, 2018 12:59 pm
I would have some concerns on their longevity, their ability to handle a significant catastrophic loss (think hurricane, wile fire, etc), and how well they would goto bat for you in a legal proceeding.
This is enough to make me wary. If they lose their first year then they go bankrupt and tell people "too bad" when claims are filed. I personally wouldn't want to be a guinea pig to that.

ShenziNation

Re: Anybody use Lemonade Homeowner's Insurance?

Post by ShenziNation » Mon Mar 12, 2018 5:26 pm

We currently offer renters, condo and homeowners insurance in New York, California, New Jersey, Nevada, Georgia, and Pennsylvania; renters and condo insurance in Texas and Rhode Island; and renters insurance in Illinois, and Ohio (homeowners and condo coming soon). We’ll be rolling out additional states in the coming year.

Ron
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Re: Anybody use Lemonade Homeowner's Insurance?

Post by Ron » Mon Mar 12, 2018 5:53 pm

z91 wrote:
Mon Mar 12, 2018 1:46 pm
SimonJester wrote:
Mon Mar 12, 2018 12:59 pm
I would have some concerns on their longevity, their ability to handle a significant catastrophic loss (think hurricane, wile fire, etc), and how well they would goto bat for you in a legal proceeding.
This is enough to make me wary. If they lose their first year then they go bankrupt and tell people "too bad" when claims are filed. I personally wouldn't want to be a guinea pig to that.
That's why insurance companies do not cover all possible claims on their own:

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

- Ron

talzara
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Re: Anybody use Lemonade Homeowner's Insurance?

Post by talzara » Mon Mar 12, 2018 9:05 pm

workPsy wrote:
Mon Mar 12, 2018 11:27 am
I'm a first-time home buyer, and investigating homeowner's insurance. I am considering the go-to options: State Farm, Progressive, etc. Additionally, I'm looking into Lemonade [https://www.lemonade.com/], which adopts a "peer-to-peer" insurance model. Reviews are widely positive, quotes are notably lower for equivalent coverage, and I appreciate a company disrupting what is a rather stale industry. However, while other options feel "safe" because they have long histories, this one feels a bit riskier simply because it's unfamiliar.
Lemonade is risky because it's losing lots of money. Daniel Schreiber, their CEO, wrote a blog post about their first year in business: https://www.lemonade.com/blog/2017-tran ... chronicle/

Their loss ratio was 137%. Schreiber says their underwriting was "pretty shoddy."

What an understatement. Homeowners insurance breaks even at a loss ratio of 60%. Lemonade's 137% loss ratio is reckless.

However, they can afford to lose money for several more years. They just got $120 million of investment: https://www.businesswire.com/news/home/ ... d-SoftBank

workPsy
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Re: Anybody use Lemonade Homeowner's Insurance?

Post by workPsy » Mon Mar 12, 2018 9:13 pm

talzara wrote:
Mon Mar 12, 2018 9:05 pm

Lemonade is risky because it's losing lots of money. Daniel Schreiber, their CEO, wrote a blog post about their first year in business: https://www.lemonade.com/blog/2017-tran ... chronicle/

Their loss ratio was 137%. Schreiber says their underwriting was "pretty shoddy."

What an understatement. Homeowners insurance breaks even at a loss ratio of 60%. Lemonade's 137% loss ratio is reckless.

However, they can afford to lose money for several more years. They just got $120 million of investment: https://www.businesswire.com/news/home/ ... d-SoftBank
This is all I need to hear; I'll stand back and watch for now. I plan on reviewing my policy every 6 months anyway, so I'll re-assess down the line.

Thanks to everyone for their input!

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steadyeddy
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Re: Anybody use Lemonade Homeowner's Insurance?

Post by steadyeddy » Mon Mar 12, 2018 9:28 pm

Traditional homeowners insurance considers a 40-60% loss ratio “break even,” because they spend 40%+ on loss adjustment, marketing, and other expenses. Lemonade automates most claim handling, so their cost loading is a fraction of their competitors’. That is why they have received huge investments—insurance is ripe for disruption.

I would sign up for lemonade in a heartbeat if it was offered in my market. Their loss ratio in these early years is a problem for their reinsurers and charitable causes, not policyholders.

darrvao777
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Re: Anybody use Lemonade Homeowner's Insurance?

Post by darrvao777 » Mon Mar 12, 2018 9:32 pm

I liked their website but they don't seem to offer homeowner's insurance in my area if I have a tenant or if I don't have a mortgage

muddgirl
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Re: Anybody use Lemonade Homeowner's Insurance?

Post by muddgirl » Mon Mar 12, 2018 9:52 pm

I have just signed up for Lemonade for renter's insurance, but I don't think I would have made the same decision for homeowners insurance. I could quite easily "self-insure" all of my home goods but I am required to have renters insurance per my lease so premium cost is very important. I have never made a renters insurance claim in 10 years of renting, but if I do make a claim I'll update the forum on how it goes.

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LadyGeek
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Re: Anybody use Lemonade Homeowner's Insurance?

Post by LadyGeek » Mon Mar 12, 2018 10:26 pm

This thread is now in the Personal Finance (Not Investing) forum (insurance).
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

talzara
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Re: Anybody use Lemonade Homeowner's Insurance?

Post by talzara » Mon Mar 12, 2018 10:34 pm

steadyeddy wrote:
Mon Mar 12, 2018 9:28 pm
Traditional homeowners insurance considers a 40-60% loss ratio “break even,” because they spend 40%+ on loss adjustment, marketing, and other expenses. Lemonade automates most claim handling, so their cost loading is a fraction of their competitors’. That is why they have received huge investments—insurance is ripe for disruption.
Lemonade charges a 20% management fee. Even if they can do loss adjustment for free, their permissible loss ratio would still be 80%. If they can do it for 20%, then they're back to the same 60% that the other insurance companies have.

Whether the permissible loss ratio is 60% or 80%, their actual loss ratio is 137%. Lemonade is unprofitable even if they're using automation.

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steadyeddy
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Re: Anybody use Lemonade Homeowner's Insurance?

Post by steadyeddy » Tue Mar 13, 2018 7:52 am

talzara wrote:
Mon Mar 12, 2018 10:34 pm
steadyeddy wrote:
Mon Mar 12, 2018 9:28 pm
Traditional homeowners insurance considers a 40-60% loss ratio “break even,” because they spend 40%+ on loss adjustment, marketing, and other expenses. Lemonade automates most claim handling, so their cost loading is a fraction of their competitors’. That is why they have received huge investments—insurance is ripe for disruption.
Lemonade charges a 20% management fee. Even if they can do loss adjustment for free, their permissible loss ratio would still be 80%. If they can do it for 20%, then they're back to the same 60% that the other insurance companies have.

Whether the permissible loss ratio is 60% or 80%, their actual loss ratio is 137%. Lemonade is unprofitable even if they're using automation.
My point is that they have funding to withstand underwriting losses while they tune their model, and their bar to profitability is lower than their competitors. The whole insurance industry has been taking underwriting losses on auto insurance for many years, but nobody worries that they’ll stop writing policies or paying claims while they fix their models.

scifilover
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Re: Anybody use Lemonade Homeowner's Insurance?

Post by scifilover » Tue Mar 13, 2018 9:22 am

Lemonade does not have a financial rating from A. M. Best. Instead it uses a rating company called Demotech. Demotech only rates small companies which use a lot of reinsurance.

Most folks outside the insurance industry don't understand the purpose of reinsurance. For catastrophe coverage, the purpose is to even out the primary company's results over time. So, after a big cat, the primary company must repay the cat costs to the reinsurer over the next five or so years through higher premiums.

Non-cat reinsurance allows small companies to cover larger individual houses. There is nothing wrong with this. However, the reinsurer(s) will be dictating to the primary company what it can cover. And, over time, poor experience always leads to higher rates, as one can tell from reading the many posts here about big increases in HO premiums. The Lemonade website says that their policies are written on a Named Peril basis. This is not competitive with HO policies written on an All-Risk except for things excluded basis. For Renters and Condo policies, this is not an issue.

Finally, the ability of Lemonade to disrupt this industry depends on whether they can deliver lower costs. The big target here is the commission paid to the agent. Lemonade, like Geico and others will not have traditional agents. State Farm agents used to get 15% of the premium on HO policies. Lemonade uses the Lemonade Insurance Agency which probably has licensed agents for the states they offer coverage. This can cost less than 15%. Their website also mentions instant claims payments. Not sure how they would do this. Sounds like a way for them to pay a lot of fraudulent claims.

Personally, I would not purchase HO or Auto insurance from any company without a Best's rating of at least A.

workPsy
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Re: Anybody use Lemonade Homeowner's Insurance?

Post by workPsy » Tue Mar 13, 2018 10:45 am

scifilover wrote:
Tue Mar 13, 2018 9:22 am

The Lemonade website says that their policies are written on a Named Peril basis. This is not competitive with HO policies written on an All-Risk except for things excluded basis. For Renters and Condo policies, this is not an issue.
This "Named Peril" distinction is eye-opening. So the implication here is that consumer coverage is not as extensive/robust as one typically sees with more traditional insurance providers who adopt Exclusion language?

talzara
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Re: Anybody use Lemonade Homeowner's Insurance?

Post by talzara » Tue Mar 13, 2018 11:53 am

steadyeddy wrote:
Tue Mar 13, 2018 7:52 am
My point is that they have funding to withstand underwriting losses while they tune their model, and their bar to profitability is lower than their competitors. The whole insurance industry has been taking underwriting losses on auto insurance for many years, but nobody worries that they’ll stop writing policies or paying claims while they fix their models.
Nobody worries about auto insurance because they have a solid business model. They need a 65% loss ratio to break even, and they have 70%. All they need is a 5% rate increase.

Lemonade has a 137% loss ratio.

They do have that $120 million investment, but they'll be spending most of the money on expansion. They need to get their loss ratio under control. Otherwise, they won't be disrupting anything except themselves.

talzara
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Re: Anybody use Lemonade Homeowner's Insurance?

Post by talzara » Tue Mar 13, 2018 12:08 pm

workPsy wrote:
Tue Mar 13, 2018 10:45 am
scifilover wrote:
Tue Mar 13, 2018 9:22 am

The Lemonade website says that their policies are written on a Named Peril basis. This is not competitive with HO policies written on an All-Risk except for things excluded basis. For Renters and Condo policies, this is not an issue.
This "Named Peril" distinction is eye-opening. So the implication here is that consumer coverage is not as extensive/robust as one typically sees with more traditional insurance providers who adopt Exclusion language?
Lemonade is writing a standard ISO HO-3 homeowners insurance policy with a few exclusions. An HO-3 provides all-perils coverage for the house and named-perils coverage for the contents. It's the same policy that most American homeowners buy. It's better than what State Farm is selling, because it's the ISO policy.

I think Lemonade's web site is talking about their renter's and condominium policies:
Your policy covers you for 16 bad things, or perils, and also covers extra living expenses, if one of those covered things happens. ... it doesn’t cover those annoying things that sometimes happen. Things like your power, water or heat going out in your condo or apartment in the dead of winter ...

https://www.lemonade.com/faq
Lemonade is writing standard ISO HO-4 renter's policies and HO-6 condominium policies. These are named-perils policies.

talzara
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Re: Anybody use Lemonade Homeowner's Insurance?

Post by talzara » Tue Mar 13, 2018 12:25 pm

scifilover wrote:
Tue Mar 13, 2018 9:22 am
Finally, the ability of Lemonade to disrupt this industry depends on whether they can deliver lower costs. The big target here is the commission paid to the agent. Lemonade, like Geico and others will not have traditional agents. State Farm agents used to get 15% of the premium on HO policies. Lemonade uses the Lemonade Insurance Agency which probably has licensed agents for the states they offer coverage. This can cost less than 15%. Their website also mentions instant claims payments. Not sure how they would do this. Sounds like a way for them to pay a lot of fraudulent claims.
Lemonade takes a 20% fee from the premium. This is the same 20% fee that a Managing General Agent would take. This company is a lot less disruptive than it claims to be.

Lemonade is using a robot to approve claims. This could be why they have a 137% loss ratio. People are more willing to lie to a robot than a human.

Loik098
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Re: Anybody use Lemonade Homeowner's Insurance?

Post by Loik098 » Thu Mar 15, 2018 8:57 pm

For follow-up, I initiated an online quote with them, just for kicks. A few notes:

1) Process was very straightfoward, asking the usual questions, but sequentially instead of all on one page (I liked this)
2) Quote I received wasn't much better than my current homeowners policy with Geico (due in part to multiple discounts)
3) I abandoned the quote prior to finishing.

The email reminders I've received since abandoning my quote have been well, underwhelming. Call me old-fashioned, but communicating with me as if I'm a millennial is off-putting and overdone these days. Here's a sample:

Hey Loik098,

It seems you left me hanging in the midst of getting your policy! No hard feelings :-)
The good news is that I was able to hold on to your quote for the next 24 hours.
If you have any q's, reply to this email and I'll get back to you shortly.

Maya


No, Maya, I don't have any "q's" for you. Hashtag smiley face.

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