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KarmaCoverage as a service


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The irony that I received this email today. 






Daniel Schreiber here, writing to thank you for signing up for news on Lemonade, and to share with you the latest on the deep expertise and deep pockets behind Lemonade.

Today we’re announcing that Lloyd’s of London, Berkshire Hathaway and other leading reinsurance companies have backed Lemonade, guaranteeing our policies come hell or high water. That this top-tier group, with over $100 billion in cash, stands behind Lemonade means total peace of mind to Lemonade customers.

We also recently revealed that our team includes the former President of Product at AIG, Chief Underwriting Officer at ACE, Senior Vice President of Claims at ACE, and Head of Financial Planning and Analysis at AIG.

We’re almost ready to launch, and we will have some more updates to share in a couple of weeks.

Stay tuned - and like us on our Facebook page and follow us on Twitter.


Best regards,


CEO & Co-founder





Edited by KarmaCoverage
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1 hour ago, KarmaCoverage said:

By contrast, KarmaCoveage as a service does not offer indemnity. 

I'm not familiar with your local laws, but KarmaCoverage is probably classified as "insurance" according to definition in slovenian Obligations Code. 

I still don't get how KarmaCoverage can be much cheaper than regular insurance that covers similar risks (has similar insured sums). The following equation always holds:

total premiums paid = total payouts (in all possible forms) + expenses (not including reinsurance premiums) + profit

You can somehow reduce expenses and profits, but most of the premiums are used for covering payouts. Unless you drastically reduce payouts, you can't have significantly cheaper insurance product. "10x what each user put in" probably covers cca. 90% insurance claims in consumer property insurance.

So your plan is to have payouts equivalent to 90% of what insurance companies pay and still have drastically lower premiums?

EDIT: including reinsurance premiums -> not including reinsurance premiums. I'm completely ignoring reinsurance and capital profits in above mentioned equation.

Edited by T8493
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31 minutes ago, KarmaCoverage said:
  • KarmaCoverage Contributions = total payouts + any money left in a users' accounts at the end of the year.

Ok, so you're reducing expenses and profit to 0 because KarmaCoverage members will do these services for free.

However, I think you're underestimating the effects of:

  • frauds - these can easily represent 30-50% percent of payouts,
  • antiselection (adverse selection) - improper antiselection measures can result in claims and payouts that are order of magnitude higher than anticipated.

I think your scheme will run out of money very quickly. Insurance have well-paid employees because it is cheaper for them to pay high salaries than to pay (much) more because of frauds and antiselection.


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7 minutes ago, KarmaCoverage said:

I think what you mean by "anti-selection' is Moral Hazard. This is definitely viewed only as a cost by the insurance industry. However I think all the P2P insurance start ups are turning moral hazard into a profit center, rather than a cost. This has to do with the Social component being the core of the service offering. I can expand on this, but will just say that Friend-surance has successfully proven that the social layer reduces both Fraud & Moral Hazard, they are the longest P2P in operation in Germany.

Moral hazard and antiselection are slightly different things. According to Wikipedia, moral hazard occurs when one person takes more risks because someone else bears the cost of those risks. Moral hazard "happens" after people buy insurance and includes change of behaviour. 

However, antiselection occurs when people buy insurance. It is consequence of asymmetric information. High-risk people are more likely to buy insurance if the insurer cannot differentiate between high-risk and low-risk customers.

This doesn't necessarily mean high-risk customer will change their behaviour and take more risks after they buy coverage.



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