How do Companies like Haven, Fabric, and Lemonade Make Profits?

[AboutThatLife]

Turn on just about any television show, speak to any CPA, or Registered Advisor and they will have you believe that the problem with life insurance is the agent and their commissions driving up prices. This prevailing belief has lead to companies like Haven, Fabric, and Lemonade.

My question is with the agent gone. Is the "savings" being passed on to the consumer? And what are the real savings being realized?

 

[Josh]

Great question, but outside of having some actuaries on the forum, I doubt anyone is qualified to answer that nor would they even have the data to make the determination.

 

[JJ2713]

They are not cutting out the middleman. They act as an agent just like any other agent and get the same commissions, maybe more if they have a special arrangement and produce enough volume.

 

[WinoBlues]

My quess is the end game for some is selling the company.

 

[scagnt83]

ACA (Obamacare) cut licensed agents in favor of unlicensed "Navigators". The stories you hear about experiences with Navigators are horrendous.

Haven Life is owned by Mass Mutual. It is a Mass Mutual policy bundled in a "Haven Life" wrapper. The people you speak to over the phone are licensed agents.... they get compensated somehow, either hourly/salary/commissions. They also have a call center of some type, which means increased overhead. Independent agents pay their own overhead.

And considering that Mass pricing is initially at the high end of the market already. Any savings from the hypothetical efficiencies they might have, would probably just put them in line with the competitive carriers.

Most consumers want someone who will shop the entire market on their behalf. But their commercials make you feel like your getting a great deal!

 

[scagnt83]

Lemonade is a bit different. They are an insurance company, but are using modern technology to create efficiencies in Sales, UW, and Claims. If they start having success one of the major carriers will most likely acquire them for a large sum.

 

[AboutThatLife]

Lemonade is a bit different. They are an insurance company, but are using modern technology to create efficiencies in Sales, UW, and Claims. If they start having success one of the major carriers will most likely acquire them for a large sum.

From what I have read when I was researching my own coverage the policies do not provide as much coverage a slightly more expensive policies would. It's almost like a minimum essential coverage situation.

So I guess that makes sense. Get a high volume of clients then sell the company to a larger insurer or private equity firm to data mine.

 

[WinoBlues]

From what I have read when I was researching my own coverage the policies do not provide as much coverage a slightly more expensive policies would. It's almost like a minimum essential coverage situation.

So I guess that makes sense. Get a high volume of clients then sell the company to a larger insurer or private equity firm to data mine.

Or sell the process, the technology

 

[Allen Trent]

Funny part is that paying commissioned agents is considered to be too expensive for many of the carriers. However, national advertising with funny commercials with well paid celebrities is also not cheap & may not even get the proper message out about the product. in Michigan, we see Geico commercials all the time. However, GEICO has very few clients Michigan with a whopping 1.5% market share. how Expensive is that advertising, not to mention all the call center employees. BTW, Geico also had a 76% loss ratio in 2017 in Michigan.

 

[scagnt83]

From what I have read when I was researching my own coverage the policies do not provide as much coverage a slightly more expensive policies would. It's almost like a minimum essential coverage situation.

So I guess that makes sense. Get a high volume of clients then sell the company to a larger insurer or private equity firm to data mine.

I dont know the specifics to that extent. Im sure some of the P&C guys would. They dont seem to indicate that on the surface. They claim to use AI to tailor a policy for your needs. But thats obviously a constant work in progress.

Its probably to keep their liability and expenses as low as possible. The real value is in their tech, not the book of business. If their tech turns out to be successful before the carriers themselves get to that point... every P&C insurer in the nation will want to acquire them, and apply their tech to their operations. Or, Lemonade could just turn into a software company and lease out the tech. idk