Comment by 6stringmerc | Hacker News Reader

Comment by 6stringmerc | Hacker News Reader

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Disclosure: I've worked in both P&C and Reinsurance for several years. Also on Wall Street for a couple years. Also in Healthcare for a couple years.

Overall I think this is a nice briefing on the state of the insurance market in the modern economic landscape. It is extensively regulated with rates set and various nuances. All of this, of course, comprises part of a grand "data set" that looks quite appealing to modernization.

Unfortunately, I think there should be a strong expectation that the market (industry) will both be openly hostile to "disruption" oriented attitudes a la Uber, but laugh at any ability to raise capital to compete at any meangingful level.

I applaud your interest in perhaps improving a legally sanctioned form of graft (I prefer Mutual Organizations myself). Conversely, my experience leads me to laugh a little because I've seen the numbers and the complexity behind the scenes. I've got no interest in the industry beyond the paycheck it provided, but it is quite fascinating in numerous respects. Just the naming conventions alone once you get to Bermuda is a trip. Good luck.

I agree with you that there are going to be challenges in building these companies, but not all of existing players aren't as openly hostile as I think you expect. I've spoken with a lot of P&C folks at different companies, and they know things will have to change, they're just trying to figure out how.

Some of the more forward thinking companies are actively investing in new models and companies. I think that's going to accelerate.

Even without that, over time, new models and companies will succeed. Some of these are going to look like stock insurance, some will look like Mutuals and reciprocals, and some will solve insurance like problems in new ways.

We certainly agree on the bulk of your points (see my top-level post elsewhere in this thread). There is opportunity, though in my opinion, a really good way to get there is to work with an incumbent on a "modern" strategy. That's really hand-wavy, I know, but you gotta find the guy who's willing to piss off its brokers and start there.

We're doing much that at Neos at the moment. We've taken a series A mostly funded by a couple of big insurance companies who are interested in what we can introduce to the market.

Are you the guys using smart home (is that the right word?) devices to try and mitigate homeowners claims by preventing or catching problems as they occur (presumably to respond quickly and limit the extent of damage)? If so, that's a pretty good idea. Carriers already give discounts for things like alarms, sprinklers, etc, but virtually none partner directly with a company that can better assure the quality of monitoring. I'm sure there's a privacy hurdle to work on, but it has to do something to loss activity, right?

Best of luck!

We are indeed. Out philosophy is that its better for everyone to prevent a claim before it escalates into one. To that end we provide smoke, flood, motion, and door sensors, along with an (optional) camera. We've got some other cool things in the pipeline capable of not only detecting problems but also responding to them before they become a crisis.

You're definitely right that there are privacy issues to be answered but we try to be as transparent as possible about what we're doing with customer's data, and by being stringent about who has access to sensor data.

There are a few unresolved issues with the preventative / home sensor approach.

1. Sensors dramatically increase the acquisition cost for a policy.

2. It is unproven that sensors will mitigate losses. We all see the potential but there just isn't data there to tell us that.

If I could prove #2 then #1 becomes simple math, if the CBA is there then incumbent carriers will adopt it. It's just not there yet to justify doing outside of startups and market tests.

3. When carriers pick a partner and get into the preventative game then there's some liability that opens up if things go wrong. One could argue that the carrier is already covering the risk - this just means the preventative offering has to line up with coverage being bought.

4. Last but not least, the biggest source of losses is CAT related in property. Sensors will get at the second tier water and fire - again loss avoidance has to justify the sensors unless the preventative side is an ongoing fee service.

Sensors definitely increase the acquisition costs, although at least early on there's customers who see them as a benefit they're willing to trade the usual cashback/discounts/etc for, so its not as bad as you might think. We're also looking at ways to reduce the cost of sensors over time.

As for proving that sensors mitigate losses, even in our initial beta period we've seen a couple of potentially large escape of water claims avoided by early detection of a leak, and that's before we start introducing truly preventative measures as opposed to just detection. We're very focused initially on escape of water because those are in fact the largest source of losses in the industry - fire is fairly rare, theft tends to be pretty cheap to handle claims for, but a leaking dishwasher left while someone is at work for the day can easily require replacing everything on the ground floor of a small house.

So I wanted to try Neos after meeting a Zoopla exec who said they had invested.

But when the premium came out at over 4x my existing renewal quote I became less enthused.

And then I saw the Excess Charge (for making a claim) was £1,000 vs the £250 norm, I ran away to the nearest comparison site to find vanilla home insurance.

I think the conversion process might need looking at to make the benefits less nakedly focused on cost.

Give us another go in a few weeks - our initial trials we were partnered with Hiscox, and were bound to only their (really expensive) policies.

We're now in the final stages of rolling out our own policies which are much more competitive - quoting on my own house has our policies coming out cheaper than my current home insurance policy, with much better service.

Awesome, looking forward to using something that adds value beyond 'invisible protection'

Are you able to completely offset the sensor costs against the loss avoidance?

Do actually observe a different risk profile in the type of customer willing to pay for a proactive service?

As appliances become smarter, there's probably a monitoring play there too - maybe some coverage that blends the concepts in product warranties as well as home warranties.

Thanks for responding. The whole motivation of why I wrote my post was, to paraphrase "You're late to the party, there are already extremely competent experienced players already working hard in what you think is ideal." Seeing your quick input pretty much affirms my impression that yes, improvements can be made but it's hilarious to think a couple years of outside study might reveal some kind of gem.

As in, there are already block-chain based deployments going for portions of the industry. That's some pretty aggressive shit in my opinion. These are also industries with loads and loads of proprietary data that simply can not afford to play fast-and-loose with integrity.

That's why Cyber Insurance now exists. Even the Industry itself knows how to layer risk models.

Hey though, if somebody wants to march into Stalingrad in the Winter and prove me wrong, they can reap the rewards. Full stop.

When I started with Neos I was genuinely surprised at quite how on the ball the insurance industry is. I'd had the same impression that it was a bunch of people stuck in the 90s throwing together spreadsheets and hoping for the best. What I've actually seen is a lot of companies providing some pretty advanced technology (just a single example, a company which given an address can return the projected cost in claims over a year, broken down by types of claim), and a lot of people who's entire job is to take large amounts of data and extract insight into people's behaviour from it, it really wouldn't surprise me if some of these data teams are on a par with Google's ad-targeting teams.

Having said that, there are a great many advantage to doing greenfield development in an industry full of entrenched companies who've been around for a long time, mostly around the level of complexity. We can get away with much simpler solutions because we're currently super focused on home insurance so don't need to deal with all the edge cases around providing fifteen different types of cover.

Since you should know, is TFA's description: "Reinsurer – There are companies that purchase insurance risk from carriers." a conventional way to put this? ISTM a reinsurer is paid to take risk, which is the opposite of how one thinks of purchasing.

The relationship between a carrier and the reinsurer is a bit of an odd one, with the relationship in my experience being more symbiotic than the description gives the impression of.

At least in the case of the company I'm at the details of the policies we write, and what feeds into the pricing, is worked out in conjunction with the reinsurer. They then agree to buy any risk we take based on that model. It is definitely a case of the reinsurer buying that risk from us though, the best way to think of it is that if a reinsurer believes the model is correct they also believe that on average they'll end up making a profit on the risks they buy, and indeed that if we didn't sell the risk to them that we would make that profit directly.

You're correct. They sell a product.

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