A report by IBNR Weekly, one of the most respected publications in insurance, alarmed many industry-insiders:
“In an attempt to better understand Lemonade’s “killer” pricing, we “applied” for renters insurance through the Lemonade and Bungalow websites… the pricing was dramatically different as Bungalow’s annual price was ~5.6x Lemonade.” (IBNR Weekly, September 29, 2016)
Incumbents find the idea of a 560% price gap unsettling. Understandably. Beyond self-preservation jitters, some raised concerns about Lemonade’s ‘killer prices’ looking a lot like ‘suicidal prices.’ After all, they reasoned, insurance companies pay out in claims over 40% of the fees they collect. So if Lemonade charges 80% less (same as saying others charge 5x more) Lemonade will be paying out in claims more than it receives in premiums! Lemonade must be recklessly naïve or worse, they surmised, and insolvency just a matter of time.