Thanks for your comment. The default scales with our property coverage (and you can top it up too) ending up at $50k total. What number would you be looking for here?
By way of background, I consult on litigation for a living. I may not be the Farmers guy but I've seen a thing or two when it comes to displacements (evictions, mold, fires/explosions, natural disasters, etc.). Here are some reasons and scenarios explaining why $29K is likely to be woefully inadequate in the areas I mentioned:
1. You're going to eat up a chunk of your ALE coverage in the immediate aftermath of your displacement and will never find permanent relocation immediately.
2. You have to assume that the claims reps on the subro or defense side (or both) are going to fight you on paying out limits.
3. You have to assume that you'll need to retain an attorney. With a standard contingency fee of 30%, your maximum ALE recovery is going to be 70% of your ALE limit, which in Goodcover's case is $20,300.
4. You have to assume that there will not be an entity against which you can pursue an uninsured loss above your limit (for various reasons).
5. You are highly likely face a substantial monthly rent increase, including the loss of financially tangible amenities, when you relocate. Full stop. That increase is likely to be indefinite.
6. Supposing you are lucky-- for example you're in a rent-controlled unit in an area governed by a law which requires the landlord to offer back a unit under your original lease terms upon rehab/rebuild-- you are highly likely to hit your ALE limit anyway for a variety of reasons. A) There might be no rebuild, in which case your rent increase will be indefinite. B) Your landlord might violate the requirement to re-lease under the original terms, in which case your rent increase will be indefinite. C) A rehab/rebuild could easily take 2-3 years (especially in a heavily regulated metro area) if the building damage is extensive, in which case you may well exhaust your coverage before you can move back in.
Whether or not your max ALE limit is "normal" is beside the point: my experience tells me that the amount is insufficient to cover one's probable downside risk in a major metro area, especially for unit larger than 1 bedroom.
I live in SF. My personal best case scenario in the event of a permanent relocation (insurer freely pays out limits without me having to hire an attorney, I use none of my ALE coverage in the immediate aftermath of my displacement, I relocate to a rent-controlled apartment with the same amenities), is that if I'm extremely lucky, $100K might last me 4 years before I have to leave SF entirely.
ALE is not meant to permanently replace your apartment. I don't understand why you would be expecting 4 years of living expenses to be covered in the case of your apartment burning down. I wouldn't even expect 4 months. It is meant to help you get back on your feet, and go to a hotel for the immediate aftermath while you look for a new place to stay.
You lost your apartment, not your entire livelihood. Chances are you still have an income to pay rent and a big chunk of contents coverage to help you out with down payments, and honestly, the insurance company should be going after the building owner.
You're misunderstanding both my point and how ALE works. Among other things:
1. ALE time limits are set by the policy unless otherwise defined by statute. In CA, for example, if you are displaced due to a natural disaster, your ALE coverage remains in place by law "for a period of no less than 24 months from the inception of the loss" (CA Insurance Code 2051.5(b)(2))
2. There is no statutory ALE time limit on uninsured losses (at least not in CA). In theory (and in practice), you can make a claim for an indefinite period of time if you can prove you'd more likely than not stay in your apartment forever (I have recently seen one such actual claim in SF for 30 years of ALE, for example).
3. If you live in SF, you should expect 4 years of ALE because it might well take that long to rebuild. The building owner may spend the better part of a year deciding whether or not to rebuild, 3-6 months getting estimates, and 2 years actually rebuilding. This happens all the time.
4. I won't speak for what other people want from their insurance, but the loss I am personally trying to protect against is not the out of pocket cost while I look for a temporary apartment, it's the additional $2K or $3K+ per month that a temporary apartment is going to cost me until I can either find something cheaper, move back into my old unit after a rebuild, or decide to permanently leave the Bay Area. I want to buy myself as much time for that process/decision as possible, because the odds are good I'll need it.
ALE for a home vs. renting are conceptually extremely different, sorry. ALE for a home covers the fact that it may take many months to rebuild, particularly after a natural catastrophe. ALE for a rental means how long it takes the renter to find suitable long-term housing somewhere else.
If the underlying issue here is that you're in some sort of rent controlled situation, and market rents in your area are way way higher than what you pay, and you expect the insurance company to pay ALE until you find another rent controlled apartment--sorry. You're not going to find many insurers that will plan on covering that.
A) There's no point in quibbling over what "temporary" or "permanent" means because the definition varies from policy to policy. There is no other source of truth unless it's in a legal statute.
B) With respect to the scenario I'm talking about, you are both factually and legally wrong. Again, I know this because I work on property damage lawsuits for a living. If my rent-controlled apartment is damaged in a fire and I have to temporarily relocate to another more expensive one for 3 years while I wait for mine to be rebuilt, the additional living expense I pay in the form of increased rent during that period is absolutely something ALE is intended to, and does in fact, cover.
Well, tell me if you find a carrier offering renters insurance with ALE of I guess the $200k+ limit you're looking for. I'm sure it exists, but not in a mass market, D2C product line, where the underlying personal property coverage is much less than that.
Also, since unlike homeowners' the carrier has no way in expediting the rebuilding of the building, I'd be surprised if they are willing to pay for your rent indefinitely until the original building is rebuilt. Perhaps you could win if you took them to court, but it will not be a routine process.
Great question - volume of stuff is proxy for your estimated increased cost of living. More stuff, more likely to have a bigger household, higher everyday living expenses (hence, "additional living expenses" would be even more!) It's not perfect, which is why it's adjustable, but have to start somewhere.
That makes sense on a surface level, but wouldn't a better proxy for CoL be zip code + gross living area? GLA essentially encompasses your "more stuff -> more expensive" model, and zip code should provide an approximation of what the baseline cost of housing is in the area.
It could be, along with say family size. But the UX cost of asking such questions is real, especially on an insurance application form. People get worried why we want to know such things so early on.
Today we're able to provide a pretty good estimate with no personal details, nothing but a zip code in fact. We might work the zip code into temp housing default at some point, but it's not without issues. Changes to the property <> temp housing link built into our rating require solid data and regulatory approvals.
We do plan to do some tests, to the extent that we're able. We can A/B test much of the UI but we can't A/B test the insurance terms that we give people because that would require different pricing and thus different rating, which needs to be the same for everyone legally (also any pricing changes require approvals regardless of A/B testing or not).
Don't take this too literally as I'm just a developer, not a licensed insurance agent. But this kind of thing is harder in a heavily regulated business such as ours.
Each insurable loss like a car accident, house fire or heart disease, has two contributors: inherent risk, and behavior. (Inherent risk is risk you can do nothing about - age, gender, genes).
To the degree that AI can help reduce or measure behavioral risk, it's not only a good idea but only fair. I think most people would admit pricing insurance based on people's behavior is fair. They certainly do not like the idea of paying for others' right to drive fast and stop short. AI is a tool that is accelerating this trend.
All of the scary things mentioned in the article actually have nothing to do with AI, but discrimination based on inherent risks. Pricing insurance on ZIP certainly does not require AI. And while genes are a medical factor, getting old is the #1 inherent medical risk.
Is it fair to price on these things? For a house, ZIP makes sense - wildfire risk differs. But it is likewise undeniable that the old will cost more to care for than the relatively young. Debating AI won't help - the real debate is about whether we as a society are willing to protect people from the inherent risks of getting old, childbirth, cancer, living in a floodplain or wildfire zone, or even growing up in a poor area. We don't really have an honest debate about that.
Yes, I hear you on fighting the price war, and agree navigating a balance of price and coverage will be important. In our view, we intend to keep prices low through the use of technology and our dividend of risk profit, but definitely charge a sustainable premium for the cover we provide. Policyholders will be able to see where the money goes so it'll be an ongoing conversation.
The first and last quoted sections are sloppy/bad drafting.
The second is egregious, and embarrassing to be found in a YC company. You should not be asserting rights to how people "link" to you.
Third and fourth basically say any user provided "content" (whatever that may mean) is now "non-confidential" the "sole property of Goodcover", "entitled to the unrestricted use and dissemination of these materials for any purpose".
That sounds like you plan to use some relatively sensitive user provided materials in any way you see fit to advance your company.
But wait! you say...we have a privacy policy! Great, except the privacy policy has an exception...
"We may share information about you as follows or as otherwise described in this Privacy Policy:
...
With your consent or at your direction, including if we notify you through our Service that the information you provide will be shared in a particular manner and you provide such information."
which arguably means that since the user accepted the T&C, they've approved your usage of their materials.
I don't feel you did this maliciously, you probably copied this from some template. Doesn't mean you shouldn't be thinking about this much more carefully though.
It seems like the ToS is just filled with typos and "insert here" type statements that you'd find in a template.
I don't think there are specific items that the parent commenter is trying to change; instead, the entire document just seems sloppy...
Best of luck with your business, but make sure the fundamental legal contract between you and your customers is thorough so that both you _and your customers_ are protected.
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?
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.
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!
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?
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.
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 :)
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.
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.
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!
"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.
