My brother-in-law has been working his tail off for the better part of the past 16 months. He was in a career transition and had the goal of starting up his own insurance shop. And, while I won’t add his name here or insurance branch, I will say that like everything else he does in life, he succeeded. And family and friends rejoiced when he opened up his new office.
However, I was recently reminded of an email that I sent him when we were up at his place visiting recently. Below is just a quick excerpt pulled directly from that email I sent on September 25, 2019, brief context provided only when absolutely necessary. The background of this email was I was asking whether he had heard of the new insurance startup Lemonade.
Yeah – I had never heard of [Lemonade] before either. And while they are mainly a property insurance company, over the next few years / decades, they are going to be an issue for you.
Here’s how the play-by-play will go so you can keep an eye out for the sign posts.
- Internally, Lemonade will continue to refine their AI, initially continuing to only offer it to low-end customers (small property claims – such as “lost bikes” which they call out in the Podcast).
- Which, you won’t hear about because it’ll all be internal. And you won’t mind, because those margins are so neglectable that it’ll barely register on your Income Statements…let alone the Income Statements of [Insurance Company Name Redacted] Corporate.
- Over time they’ll begin offering more products that are direct competitors to you (and by you, I mean [Insurance Company Name Redacted] in general).
- And they’ll do it at rates that you can’t match because their business model isn’t as dependent on human staff.
- [Insurance Company Name Redacted] will eventually “officially recognize” the threat, but they’ll “have a plan.” They’ll recommend that you retreat to highly-customized policies – or essentially focus on areas that are still too difficult for the AI. And they’ll have some “facts” and “figures” to show why you are still safe with them…
- You may at this point start to see/hear about leaders selling corporate stock – which of course they’ll disavow or say something like “College is expensive….”
Until Lemonade trains their AI and moves into those arenas as well. Then, there will be nowhere left to run.
I went on to urge my bro-in-law to build his office to sell and to plan to sell in 8-10 years. My thinking is that the traditional insurance office won’t be able to compete in 12-15 years, and selling then would allow him to maximize his portfolio value.
Now, you may be wondering, why do I say that? What do I see that makes me feel that the insurance market is about to get shook up? Well, you can call me Nostradamus if you’d like; however, it’s much more about my pattern recognition abilities than prediction abilities. Let me show you on the next page.