We’ve endured an unseasonably hot Memorial Day weekend here in Michigan. A nice, refreshing drink of lemonade would seem to be ideal for the early arrival of July-like heat. Right on cue, my personal email inbox included a message from insurtech firm Lemonade this morning, announcing that their refreshing brand of homeowners and renters insurance is now available in Michigan! Woohoo!
Being a naturally curious insurance geek, I took the bait and began navigating Lemonade’s “easy” process for obtaining a quote. Indeed, it is easy. A few clicks and without many mental cycles consumed on my part and I soon had my monthly premium quote. Then again, loading a gun is easy. In the case of a Lemonade insurance quote and a loaded gun, the real danger lies in what you do next. The untrained and uninformed can do great unintentional damage to themselves and others.
Now hold on… Yes, I realize that no one is going to die from obtaining or acting on a Lemonade insurance quote. The comparison to a loaded gun is purely metaphorical for the financial harm that can result from making naive insurance purchase decisions. I am admittedly painting an extreme analogy here. I also should point out that I am no insurtech neophyte. My resume is replete with RMI technology consulting experience – so I am by no means anti-technology or anti-innovation, especially when it comes to the insurance industry.
So how did my Lemonade quote experience go? As I said earlier, it was easy. In fact, it was fun. The results, on the other hand, were underwhelming and alarming. After watching the Lemonade engine at work (it took only a few seconds to “crunch the numbers” as it checked various “municipal databases”), I noticed that it rated my property pretty low for fire protection. And yet, I am only 2.5 miles from the fire station and have a fire hydrant literally in my front yard. Lemonade also suggested an insurance limit to “reconstruct my home” that I know to be woefully inadequate. It also suggested a liability limit of only $100,000. Far less than I currently carry, and truthfully far less than any middle class homeowner should have in this litigious era. All of this for a premium 75% higher than I currently pay for my much broader homeowners insurance policy with a well known A++ rated insurance carrier.
Yes, I can manually adjust Lemonade’s offered limits upwards, but the cost goes up accordingly. How many unwitting Lemonade buyers would do that? Most of the insurance consumers attracted to Lemonade’s simplicity and slickness are likely to accept the suggested limits, implicitly trusting Lemonade’s obviously flawed artificial intelligence to have their best interests at heart. After all, Lemonade (unlike those greedy legacy carriers) is the insurance carrier with a heart and a social mission, right? And how do I go about adding my trust as a named insured since the home is actually owned in the name of my trust? It also looks like I can add my scheduled property (e.g., jewelry, electronics, collections), but it is clearly a more convoluted process. Over the years, I have invested time in conversations with my insurance agent, asking questions and discussing coverage options in order to assemble insurance protections that fit my unique risk profile. I have purchased coverages that others have not, and removed coverages that I did not need. What the general public (and hype-laden insurtech startups) often misunderstand is that insurance is not a commodity and individual risk profiles are not cookie cutter. You simply cannot automate the nuances away with artificial intelligence – at least not yet. And Lemonade, for all its slickness, still has a long way to go.
In the meantime, Lemonade’s marketing hype preys on the blissfully ignorant insurance-buying public (and smartphone-dependent Millennials in particular) who are lapping up (no pun intended) the Lemonade platitudes. How many others “take the bait” and without having an insurance background as I do, they bought the Lemonade policy and left themselves insufficiently protected with inadequate limits and perhaps inadequate (or unnecessary) coverage? If my experience is typical for Michigan, then perhaps the overpriced, inferior coverage result will prevent many from buying the Lemonade insurance product. But perhaps my quote was an anomaly and other Michiganders are out there today, receiving attractive prices from Lemonade and switching their insurance protection without the benefit of any professional insurance knowledge or assistance – except for “Maya” the friendly and spunky automated “agent” in the Lemonade emails and website. Sorry, Maya – your Lemonade is way too sour for me.