Hi Chris, This is a great service for almost 70% of the population who don't know what events are not covered and the fine print gotchas from the insurance companies.

This should be a really helpful service, kudos on the idea.

The only concern I have here is, privacy. Most of the home owners are not comfortable to upload docs that includes their names or property details (easy to know their net worth) from this. Also, how are you managing data security?

Do you have any plans to address these concerns?

Man, I bet it's even higher than 70%.

I was in the hospital in February, and I asked the nurse how much it would cost to drain a subungual hematoma. Nobody knew!

Maybe it would've been free; maybe it would've cost $1,000 - it definitely doesn't feel good to decline a procedure because you have no idea how much it'll cost.

While this post thread is fire and casualty insurance, when you look ad medical insurance, it is just insane.

I had an appointment at a specialist and I am on a high deductible plan. I called up and asked how much I would be spending. They refused to tell me. I tried this again, and another person refused. "We can't know how much it will cost."

So I went in and asked. Same line. "It matters what happens in the appointment and if you have any treatments." "Sure, but what about the base cost assuming nothing else happens?" "We can't say." "Look lady, I'm needing to know if I can afford this. I don't need exacts. I need ballparks. $100? $500? $1000? $5000?" "Oh, i can't imagine it will be that much?" "Which?" "I can't say."

I needed the appointment, so I went in blind. Came back out, and they literally couldn't figure out what to charge me. "We don't see a deductible..." Yeah, I am from an HSA and have a high deductible plan." "Um, no change at this time. We will send you an invoice." Turned out to be $50.

With such price transparency, we will never fix things in the US.

While the problem is not as crazy on property insurance, it is still subject to complexities. Different policies have different exclusions and different riders. You can't just compare apples to apples. Heck, even auto insurance has nuances. Some only pay out if you are driving your own car while others will pay out for any car you happen to be driving.

I've seen "haven't read my policy" numbers in the 80s and 90s depending on the survey. And yes - we're property insurance people but know that health can be even crazier. I understand a lot of the times the price for the procedure isn't really decided until they find out who's paying for it.

Thanks!

You make a really good point on privacy - insurance is a trust business and managing this right is really important. We delete Dec pages w/in 30 days (we don't need to keep them past giving you the advice), so that's a start and something we don't mention on the site but should. We also never expose user data, or show you what you've uploaded.

Unfortunately though to get insurance advice, property details are pretty important, and if you are concerned with your Liability coverage net worth is pretty important for a service to know too. What we don't need are names - actually people could black out that personal info (even address) and it would be fine!

"(even address)"

I thought geography factored into deciding premiums since different areas had different risks of specific events that would lead to an insurance payout. Does what you all are doing simply not need that? Or are you saying that analysis can be left off if they desire for privacy?

Edit: Thanks for the info!

Geography is important, but your specific street address isn't required for this tool. And really, most insurance pricing is done at a higher level than street address (zip, or insurer-defined territories) so actually it is one of the last bits of info needed. For rough advice as this gives, we don't need it.

Dan at Goodcover.

The later. It's a factor for insurance premiums, because being in an urban landscape vs a wooded area has a massively different fire risk.

I was just within the last hour look at renter's insurance, so I appreciate the goal of the company. It doesn't look like you currently give advice for people comparing different offers - is that something you plan to do?

Also, I didn't understand your description of "returning any unclaimed premium back to customers, keeping a fee instead". Being not too familiar with insurance, can you give an example of how this would work?

Thanks - and good luck with your renters insurance search. You're right we don't currently give advice for comparing through the tool - but I've written about it on our blog, and have a even more low tech comparison tool there (google sheet!). https://blog.goodcover.com/save-time-and-buy-home-condo-rent...

Hopefully that could help you out in the mean time.

Regarding returning unclaimed premium - good question. The way insurers make money is by 1) collecting premiums and holding on to them, generating some interest, and 2) keeping more premium than they need to pay out in losses and expenses, which is called "Underwriting Profit."

Typically Home/Renters insurance is written in such a way that a company tries to keep 5-15% of premiums as Underwriting Profit.

We think that the conflict over underwriting profit is at the heart of why the insurance experience is bad - there's not much incentive in improving a user experience that you don't want users to use... So we want to give that 5-15% back in the good years where we don't need it to pay claims. So, what you would see is a dividend at the end of the insurance year. It's not going to be much, but it is "putting our money where our mouth is" on our commitment to policyholders.

Turns out that's really hard to do legally and financially - mutual insurers would technically do this, but starting one is a hugely capital intensive process. We're on the path, and hope to be able to share more about the process soon!

> So we want to give that 5-15% back in the good years where we don't need it to pay claims.

Isn't that what Lemonade initially tried to do? They ended up having to go to their charity angle because of rebate laws. How do you think you are different? Mutuals do not seem to have a competitive advantage when it comes to Loss Ratios...what is your thesis exactly? Not to mention Lemonade is running at almost 3x their filed Loss Ratio now.

End of the day, personal lines is a very competitive market, where insurers are happy to get a net ~95% combined ratio (including CAT). Why would you think you will do better?

What will you do in a bad year when a couple of cats drive your loss ratio north of 110%? I imagine the answer to that is a big part of the regulatory challenge!

I wish you the best, I do like your goal. I spent almost 15 years from post-college to ~present in insurance before moving on recently to something else here in SF. Ping me if you ever need anything or just want to bullshit about the industry :)

Awesome, I will - thanks!

Property insurance attritional losses are fairly predictable, and reinsurance is there to smooth out Catastrophe loss years; they'll be there to support us and bring our Loss Ratio back under control. So key is to charge enough to cover attritional (i.e. predictable) losses + reinsurance premiums.

But yes in those bad years where there's no UW profit, there's no dividend - everyone's contribution was needed.

If you're covering CAT risk 100% using reinsurers, you are at a competitive disadvantage compared to insurers who can cover some of that risk themselves...reinsurers have their own returns they look for.

That's true, but I've yet to see a primary insurer that doesn't use reinsurance.

It's not about using "reinsurance", it's about how much risk you are laying off to them. Large insurers don't insure "just the predictable losses" (unless they set up their own reinsurers) because it lowers their ROE too much to give reinsurers so much of the underlying risk.

A question about this "dividend".

Obviously, this is a major source of profit for a insurance company, but I imagine is also used to refill reserves after a big payout year. Insurers must have been piling cash away for years after Andrew, Katrina, Sandy etc to recoop payouts. How would this balance with returning money on good years?

Underwriting profit shouldn't be a major part of the business model. If you're making too much money year to year from that, there's going to be regulatory pressure to lower your filed rates in a given market, and absent that, competitive pressure, because your competitors are going to have similar loss behavior in your segments and will cut rate to take market share from you. Customers see insurance as ~fungible and they will shop, although not as often as they should.

EDIT: I see the OP responded to you, and independently, I'll say he gave a great explanation and probably knows WTF he's doing. Didn't expect to see IBNR explained on HN!

Thanks! Oh IBNR... I'm surprised too, but glad it got a chance to shine!

And you are right - UW profit shouldn't be a big part, but it's a contentious issue right now with interest rates where they are. Since it shouldn't be a big part of our profit model, we're looking to put our money where our mouth is and return it.

Underwriting profit hasn't always been a big component of insurer profits - typically "float" or that interest on the premiums held has been the big driver. But in a low interest rate world, companies have had to keep more and more underwriting profit in order to exceed cost of capital. As they need more UW profit, so the fight over claims gets worse...

You are right though that money needs to be set aside for bad years - in insurance we call it "reserving", and actually it is already accounted for before the 5-15%. It is stashed away in the loss ratio as "incurred but not reported" or is paid in reinsurance premiums, which are a fixed cost. 5-15% is what is left over after all that (and admin expenses).

CAT Reserves are not IBNR...IBNR would, e.g., be after the CAT event happens, but before the claims are reported. I'd like to see a definition that says otherwise!

Yes, correct, IBNR can come from cat, or non-cat.

I am not sure you understood. This sentence--

"You are right though that money needs to be set aside for bad years - in insurance we call it "reserving", and actually it is already accounted for before the 5-15%. It is stashed away in the loss ratio as "incurred but not reported"

Is not correct. CAT reserves are not related to IBNR. IBNR is a) we know the loss has already occurred b) the policyholder has not reported the loss yet. (Or at least in a probabilistic sense, like the hurricane has landed, and we know it will take 10 days for all the claims to be reported, and that 2 days after landfall, say 20% of claims have been reported, and the other 80% of those hurricane claims will be reported over the next 8 days. So at that moment "2 days after landfall" the actuaries will estimate how much IBNR there is.)

What you described is a CAT reserve...it's a seperate reserve taking into account, say, over a 10 year period, the odds and severity of a CAT risk.

If you still are unclear about the distinction, please consult your local actuary or CPCU :-)

Are there any California HO providers that still offer Guaranteed Replacement? I had it at one point with AAA, but they jacked rates on me, and it got too expensive. I'd like to get it again, but haven't been able to find it.

Typically Guaranteed replacement is offered by HNW providers such as PURE, AIG, and Chubb. Travelers might do so too. It's hard to find though, so talking to an insurance broker that can access those specialist markets (i.e. they do not sell online) might be your best shot. Also, most insurers will offer some kind of Extended Replacement Cost which pretty much does the job too.

Interesting development though is in CA, insurers are legally required to recommend you a replacement cost coverage amount that is adequate for your place. That probably has a lot to do with the changes you've seen on "guaranteeing" something vs just recommending.

Yeah, the HNW policies are also stupid expensive. AAA was the only provider for normal people I found that still offered it. Extended replacement cost theoretically does the job, but in coastal california, we're already looking at rebuild costs in the $300+/sqft level. Add in the cost increase from labor shortages, and I could see it spiking significantly above that. (Looking at my policy, I see the Extended Replacement providing 30% more than baseline, and 80% more than baseline for FEMA declared disaster, which I suppose is probably enough. I still prefer reasonably priced Guaranteed replacement, as that pushes all that risk on to the insurer, rather than requiring me to guess what the rebuild cost of my home will be).

I did run your automated advice system with my recent policy renewal. Reporting was pretty good, although I was surprised that you consider a $3000 deductible "abnormally high". I don't think it's worth trading money with the insurance company as premiums to cover small stuff like that. Not everyone shares my feelings, though.

Yes, you're right - "abnormal" is a bit in the eye of the beholder. It would have been a relative assessment - a 3k deductible is much more than most people carry (even HNW, an area I've worked in before).

On guessing rebuild, in CA you shouldn't have to guess, as it's the insurer's legal requirement to recommend something accurate, and the DOI supports the consumer there. Generally those increases will do the job on like-for-like replacement - the big problem is if your Building limit has not been reviewed for years, as they get out of date.

Guaranteed is definitely expensive since it has cost insurers some big claim headaches, so not surprised it's even harder to find now as some insurers are hurting after all the fires.

Ahh, good to know that the DOI has some teeth on the accuracy of the recommendations. That makes me more comfortable to take the extended replacement. Still frustrated that I can't just sell that risk to an insurer. After all if GR has caused big claim headaches in the past, and ER wouldn't have had those headaches, wouldn't that be to the customer's benefit to have GR?

The headaches as I understand it are mathematical really - without a limit to cap costs, outliers have the potential to completely mess up the pricing. Anything where one claim could destroy the predictability of results is hard. So only a few wildly inaccurately priced GRs can take down a whole book - hence capping. If you aren't likely to have outliers, you don't need limits, and some HNW insurers are removing limits entirely since they just price accordingly.