LMND Take Market Share?

[wescobrk]

Has anyone on the board done any research into Lemonade if they have a reasonable chance to disrupt and take market share in the insurance market?

[Gregmal]

I put this one on the watch and research list last week. I think the idea is kind of bogus as a shareholder owned business. Its kind of stealing the concept of a mutual insurance company while attempting to get off the ground off the backs of investors. But then again, in todays world, making less money = good, I suppose. Down the line I'd imagine public offerings will regularly support underwriting losses as a normal course of business.

[wescobrk]

Thanks for the response. I'm skeptical as well but the narrative seems to have potential to disrupt to some clients. Celebrities like Jessica Alba with honest and the whole ESG movement might cause the company to take at least a small share. It is on my watchlist as well.

 

[DooDiligence]

Is National Indemnity still reinsuring here?

 

www.insurancebusinessmag.com/uk/news/technology/p2p-insurer-lemonade-to-be-reinsured-by-berkshire-hathaway-xl-catlin-29324.aspx

 

Not that it would make any difference to me. I have enough exposure to insurance through BRK. Just curious.

[lnofeisone]

I put this one on the watch and research list last week. I think the idea is kind of bogus as a shareholder owned business. Its kind of stealing the concept of a mutual insurance company while attempting to get off the ground off the backs of investors. But then again, in todays world, making less money = good, I suppose. Down the line I'd imagine public offerings will regularly support underwriting losses as a normal course of business.

 

I've dug into this one a little bit and holding a short position (started with a small tracker but now about 1/3 of a position using bull spreads going out to march). I'm not shorting on valuation, just the story makes little sense. Some of my thinking/findings:

 

1) I don't think their strategy of attracting younger generating by offering lower priced renter's in hopes of keeping these folks for homeowners will work. The assumption they are making is that renter's will be the first entry into insurance markets by these people. I'd argue that car insurance will be first on that list. If I am young and have a car, I probably pay a high premium on that. Sticking to existing carrier will probably be a better option because I can get comparably priced renter's (maybe somewhat higher but renter's insurance is so dirt cheap) but I get a decent reduction on car insurance. Ergo, I'm now sticking to my carrier. 

2) Website was phenomenally easy to use. I really like the feature where I can bring my coverage to compare.

3) The prices for homeowners products were in the same general ballpark as Progressive. Erie was the cheapest. I tried few NE location (DC, VA, NY). I tried few months back and tried a month back and changes were minimal.

4) Pet insurance seems to be extremely competitively priced (I have Figo and pay ~$50/mo for what Lemonade offers for ~$35/mo). Not sure what Lemonade has that Trupanion/Figo do not.

5) No idea how to value B-corp but it would certainly be a lower value than whatever traditional valuations would suggest

[Gregmal]

Thanks for the additional details. I think bigger picture, when it comes to disruptive tech....you are either disrupting the overall experience, or the pricing; in many cases both. Isn't that the ultimate AMZN facet? Cheaper and more convenient? And whereas with buying a car, driving a car, buying a home, booking a hotel, etc....insurance isn't really all that "inconvenient". You(typically once) do the application which is annoying but not egregious. Then you basically just pay your bill once or twice a year when renewal comes in. Pretty effortless. The only other "experience" element would be with filing a claim, which LMND seems to highlight as one of their selling points, but numbers wise, people dont file claims often. Even if they have a horrid experience, they might switch once after being with their previous carrier how long? Or they might not...I dont know. On the other side, an insurance company with a lot of claims is bad for shareholders. But outside of this, there's nothing to "disrupt" outside of pricing. And maybe they've reinvented the wheel there, but I just dont see that much of an avenue to outdo whats already the model. But maybe I lack imagination.

[oldye]

I used it for a year and just resubscribed, my apartment building requires insurance and at $5.00 a month its less than half of what Geico quoted for basic coverage. I think the most disruptive thing they have going for them is that its easy to forget to cancel. I wonder how long they'll last.

 

Just saw that they have a 3 billion dollar market cap...Risk on...Jesus..how is a company with no competitive advantages, that's losing 100+ million per year worth $3 let alone 3 billion? Am I missing something?