Well, it’s not everyday you publish a Blog post about a relatively new company within the insurance industry, and a couple days later the CEO of said company offers an interview in which he says, among other things, You, sir, have your head up your, uh, in a dark place.
Here’s my dark place post: Lemonade Inc.: Hype, Trust, Transparency, Mutuality. Since I can’t count on you having read the piece, here’s the gist: (And I must note, the piece is about a lot of stuff besides this):
Lemonade, Inc. is more of a P2P (peer-to-peer) company with AI (Artificial Intelligence, Scripts, Chatbots and, of course, Big Data) bells and whistles, than it is an AI company with a sexy P2P front end.
Why does that matter? Well, maybe when all this comes out in the wash, it doesn’t matter at all — but if it does matter it’s because P2P seems suspiciously like what the insurance biz has historically known as Mutuality — the recognition and even celebration of mutual interests of insureds and insurers. And as something with those particular historical legs, that could matter, to both Lemonade itself and to the insurance business in general.
I’m confident about my evaluation of Lemonade but I admit to feeling totally blindsided when Lemonade’s CEO, Daniel Schreiber, said, a couple days after my post, Meh…, No, we’re really all about the AI, screw the P2P, it’s not really important.
Here in his own words:
We’re actually using that term [peer-to-peer] less. Basically, when you buy Lemonade insurance, we ask you to choose a charity that is near and dear to your heart. We create a group, in a sense, of peers who are defined by their common cause. The “peer” element is using the member’s premiums to pay claims and if there is money left over, it is given to their common cause. We had expected it to be something that would help people understand the model, but it generated more questions than answers. We decided if it’s not helpful, we won’t ram it down anybody’s throat (emphasis mine; KJH) — we’re not hooked up on one title or descriptor.
Now, it’s interesting, if admittedly nitpicking (though not from a philosophical perspective, which is actually what we’re talking about here: What is the essence, the purpose, the point of this company?), to notice that Schreiber does not say that “the model”– P2P — has actually changed, but rather because “people” don’t necessarily seem to understand P2P very well, it’s “not helpful” to promote it in that way or “to ram it down anybody’s throat.” Which I take to mean: We’d rather market ourselves as AI than P2P; AI works better than P2P from a marketing (“people understand”) POV.
So I really can’t take Schreiber’s seeming about face vis-a-vis P2P and exaltation of AI (plus Behavioral Economics) all that seriously. If he thinks that AI can work marketing miracles that P2P can’t, or hasn’t so far, so be it. He’s certainly in a better position than am I to judge the marketing power of P2P for Lemonade so far — and note that we’re talking about a few scant months of experience at this point — but he has not said that “the [business] model” of Lemonade has been fundamentally altered. Rather, we’re just going to emphasize AI from now on. (Like, we got a whole lot of really great pub whiz on our three-second claim turnaround so let’s go with that rather than try to ram P2P down anyone’s throat…)
Well, FWIW, I think he’s wrong. He’s the CEO and I’m just an observer, but: Nobody really cares about paying claims in three seconds, except insurance pundits who now set the theoretical claims-paying bar at three seconds and must then, consequently, look for two seconds, or instantaneous claims-paying — which I think is actually nobody, including the guy who got the three second satisfied claim.
Do I want a Chatbot? Yes! Do I want a quick claim turnaround? Yes, of course! But if that’s what I want — if that alone satisfies me — and if I don’t give a damn about the nature of my claim and how it will impact the “cause” I’ve chosen to identify me as a Lemonade customer (that “charity that is near and dear to [my] heart”) — then woe betide Lemonade’s reinsurers, because they’re going to get fucked, excuse the expression, big time, and so too then will Lemonade, in short time!
To think that I, as a Lemonade customer, will identify more with the purely transactional nature of its smart and fast onboarding and claims processes rather than its P2P or affinity or mutuality business model — well, that’s a bridge too far, and I think it’s a bridge too far even for our caricatured Millennials who, yes, indeed, want fast and smart and want it on their phones. Nope, your tech is great, fast is cool, and I love it, but that’s ultimately not why I’m buying from you. Can I explain to Mum what P2P is? Probably not, but I think I kind of get this cause thing, and I know damn well I can’t explain the Artificial Intelligence stuff to her any better…
Another point: Mr. Schreiber says:
Lemonade is an insurance company built on artificial intelligence and behavioral economics. Those are the two pillars of our business.
So much for “we’re not hooked up on one title or descriptor.” Yes, you are, one way or the other. Every CEO knows s/he must be able to articulate the company in “one (or maybe a few more) title or descriptor. That’s the least of what you’re there for, for goodness sake.
And then let me ask: What is the point of Behavioral Economics when you take away P2P and are left only with AI to explain your value prop? I suspect that Dan Ariely, the Chief Behavioral Economics Officer, is now asking himself that very question. (Hope you kept your academic position, Dan.) Face it, all those BE principles really only make sense with the P2P model and are effectively irrelevant to the AI. OK, technically, there’s some crossover there with how you design some of the onboarding and claims processing stuff online, but you really wouldn’t want to hang your job security on that… (What’s the position of a BE guy in a non-P2P AI company? Unemployed.)
But I actually think Dan’s safe for now. Lemonade’s still a P2P company — for now. If Mr. Schreiber really wants to deep-six that, though, and hang his company’s hat instead on cosmically super fast AI — or insurance company as insurtech rather than insurtech that enables a more meaningful insurance company — then perhaps all the talk and expectations around Lemonade will turn out to be, well, just what it seemed to be at the beginning:
But if that’s truly the case — that Lemonade is not really an insurer at all but just another insurtech — then put yourself up for sale, for goodness sake, let the VC guys recoup their investment. Just spitballing here, but wouldn’t this be a nice little investment for, say, Allstate? Or maybe, say, the Guardian? Not your type of business now, but rental and homeowners with sexy AI — three second claims-paying! — could be an excellent entree to the elusive Millennial market. Just sayin’…