Lemonade is an example of a company that is embracing big data to underwrite risk. To provide an insurance solution, a customer simply needs to use the app to submit his address, swipe through a few risk-based questions (fire alarm, burglar alarm, etc), and he’s insured. This underwriting model would not work well for underwriting all property types as the lack of thoroughness creates a lot of exposure for insurance carriers. However, Lemonade is choosing to focus on a market that it knows well–urban dwellers–to provide its services to.
As un-thorough as it may be, the smartphone app is Lemonade’s form of inspection technology. However, we’re seeing a lot of insurance carriers choose to use innovative inspection technology to strengthen their underwriting processes. For example, some insurance carriers are testing the use of drones to perform property inspections. Others are embracing smart home technology to gain valuable insight into actual ways that homeowners are protecting their homes.
The benefits of inspection technology are undeniable. However, it’s important that insurance carriers don’t replace the value of an in-person property inspection with technology and big data. Instead, a combination of a physical property inspection and the use of inspection technology will allow insurance carriers to more diligently underwrite risk and protect their bottom line.
Lemonade is still very new to the market and is only available to renters and homeowners residing in a few states. It will be interesting to see how the limited information that the insured provides impacts the company’s profitability. Only time will tell if this will be a sustainable business model.
Our team of seasoned professionals at Insurance Risk Services has been providing insurance carriers with accurate underwrite support for more than 35 years. We’ve seen how technology has made its way into the industry over the past few decades and have embraced it ourselves to best help our insurance carrier partners to make informed decisions. Please contact us to learn how we can help you to put your best foot forward and protect your bottom line.