Ask a question. Get an answer.

Ever been to Quora?

If you haven’t, it is a crowdsourced question and answer site.

Ask a question, no matter how odd, and you will get an answer, or many answers.

Each user can define their areas of specialty, mine is good ole’ insurance.

As you spend some time looking at the insurance questions asked by consumers, you quickly begin to realize how little the average insurance consumer understands about our industry.

Questions like “What is the cheapest car insurance in Waco?” come up almost every day. One of my favorite questions was “Is ethical insurance sales a myth?”

You can guess how tall THAT soapbox was.

Another was “How do I get the biggest payout from an insurance company?”

I answered “Get rear ended by a brain surgeon in a MB 600 SEL, and get ejected through the windshield. That should be worth a couple million dollars!”

Not all questions are so non-sensical, and there are individuals who are really looking for good advice on difficult insurance and claims questions.

A Community of Professionals

As you spend more time reading and posting in any of the subject areas, you realize that there is a group of individuals that you see posting on a regular basis. It is certainly the case with respect to the insurance questions.

There are a dozen or so ‘Usual Suspects’ that offer answers.

A handful of agents, both P&C and A&H, a former claims adjuster, some tech types (including yours truly), and some attorneys. Everybody offers a slightly different perspective.

One of the industry insiders that provides great answers now and again asked a question last week.

It was directed at the rest of the professionals on the site was whether or not ‘Zero Everything’ was going to change insurance as we know it.

What impact can the industry expect from Lemonade’s zero everything insurance policy?

This is a great topic for our readers here at Agency Nation, so I’ve reproduced and amplified it below:

How Much Sugar Is In This Drink?

If you read the Lemonade press release and surf over to their site to read their blog post on Zero Everything, you’ll get the impression that this new offering is radically new. And if you’re not an insurance professional, it may indeed seem that this is a revolutionary improvement in insurance.

As most things Lemonade, there is a lot of marketing hype surrounding cosmetic changes.

Zero Everything has 3 basic ‘new’ benefits.

Full Disclosure: I’m not insured by Lemonade. I don’t have a policy that includes Zero Everything. I’m basing my answer off of the press release and blog post describing the Zero Everything policy:

1) Zero Depreciation

Most homeowners insurance policies include replacement cost coverage, or ‘zero depreciation’.

In the blog, Lemonade provides examples that indicate that if your couch was $2,500 and it is destroyed, you get $ 2,500.

So is this an amazing new nw and exclusive Lemonade benefit? Not quite.

Replacement cost coverage actually will provide you with $ 3,000 to buy a new couch if the prices have increased on that same couch.

Will Zero Everything provide coverage to purchase a more expensive replacement item? It isn’t clear at this point.

Of course with a boring old non-Lemonade insurance policy you can purchase something less expensive that offers depreciated coverage.

Less choice and less pricing flexibility is somehow better?

I don’t think so.

2) Zero Rate Changes

This is a great statement of intent. The Lemonade claim is that if you submit a claim, your rates will not increase. The press release doesn’t really explain what this means.

In the blog post, they are very careful to throw out a huge disclaimer “as long as it’s not abused.”

What constitutes abuse is left unstated. Your guess is as good as mine.

And while it is good intent (and great marketing), it may not be good insurance.

While Lemonade may be proven right that the social good (profits to charitable causes) prevents fraudulent claim activity, the jury is still out.

Will changing the behavioral incentives to avoid filing small claims impact the frequency of submitted claims be offset by the potential social good?

I lean no.

3) Zero Deductible

Lemonade builds a strong case that their automated claims processes remove much of the cost in adjudicating claims.

And those expenses do contribute to insurers’ reluctance to pay small claims. However, it is specious to say that those expenses are the reason that deductibles exist.

As insurance professionals know, deductibles have a much bigger role to play in insurance. Deductibles are part of insurance policies because they discourage the idea that an insurance policy is a maintenance contract.

Losses that get paid because there are no deductibles will have to be paid for with premium dollars.

There is no free lunch.

More paid losses equals higher premiums for coverage.

Long Story Short

Lemonade works hard at the business of insurance.

They aren’t afraid to challenge orthodox industry thinking and practices.

By and large, Lemonade has been very successful in revolutionizing the customer experience of purchasing insurance. Their claims payment process also looks to be a game changer.

On the coverage side however, it seems that Lemonade’s offerings are like fountain lemonade:

Lots of marketing hype (sugar) and very little substance (real lemon juice).

Whether Zero Everything ultimately succeeds, Lemonade deserves credit for being innovative and reengineering the insurance product.

Good on them.

Got a different opinion?

Hit me below and let’s start a dialog.

Marty Agather

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Photo by Milo McDowell

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