Startups Taking Aim at Homeowners Agents

Brian Anderson

Executive Editor
100+ Post Club
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Insuretech startups “Hippo” and Lemonade recently announced the end of new funding rounds and plans to “disrupt” the California homeowners insurance market (see article in link below).

These direct-to-consumer models explicitly state they can save clients money by bypassing the commissioned agent and using bots and machine learning to service customers completely online.

Just curious as to how serious traditional P&C agents who sell homeowners coverage take threats like these. Is there real cause for concern, no cause for concern, or maybe cause for concern years down the road?

Any worry that this “machine learning” platform has the potential to someday be a serviceable replacement for the value and expertise professional agents provide to their customers?

If this is of little or no concern to you right now, is there anything that does worry you about the future of the agent’s place in distribution channel?

Insurance Forums | Insuretech startups Hippo, Lemonade on the attack against agents who sell homeowners coverage in California
 
It's clear what direction things are going. I'll make my money but my kids won't have anything to take over.
 
I've done quotes with Lemonade in NY they undercut coverage and they're still priced high. When it comes to homeowners insurance I don't believe consumers will ever really want to loss that "human touch" of having an actual agent.

Auto insurance is a different story
 
I can't wait until the claims start coming in. Here are some examples my agency recently experienced. Insured's dog ran out to play with the neighbors dog. Neighbor got tangled in their dogs lease and fell. No injuries but neighbor got an attorney and company paid $40,000 to settle. Insured's dog got out and went down street and killed neighbors miniature yorkie. Insurance company settled for $50,000. Tenant paying $15 per month for renters policy. Lightning damaged contents. Insurer paid $5,880. Now insured was burglarized. Insurer paid $4,500. Total fire loss, insurer paid $157,000. Tree fell through roof. Insurer paid $45,000. I could go on and on. These new disruptors will make a profit for a few years until the claims start coming in. Just because you by pass the agent doesn't mean their will be few claims.
 
I think the missing piece here is understanding their reinsurance. I guess places like this purchase a TON of reinsurance & choose to make little profit to start until they get premium on the books? That's what I want to understand.
 
I think the missing piece here is understanding their reinsurance. I guess places like this purchase a TON of reinsurance & choose to make little profit to start until they get premium on the books? That's what I want to understand.

Without agents doing field underwriting, this does seem ripe for adverse selection. How is the reinsurance going to hold up if loss ratio is out of sight?
 
VolAgent, you are right. We inspect every home before we give a quote. There are many homes we won't quote with a standard market. The startups may get overloaded with non standard homes.
 
There prices may be low BUT you get what you pay for......or in this case you DO not get the advice of the agent they cut out.
 
VolAgent, you are right. We inspect every home before we give a quote. There are many homes we won't quote with a standard market. The startups may get overloaded with non standard homes.

True...but you're hiring 3rd party inspection companies correct?

Every policy in my state that gets written standard or not, gets inspected.
 
Gulfman, Most companies do use third party inspection companies but since these startups are supposedly streamlining the process and cutting out agents I wonder if they will do inspections.
 
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