Crookslikely to probe the P2P insurer with bogus claims

This is a blog about a blog. It’s also a predictor of thingsto come.

The new insurer Lemonade thinks it has awinning formula. Get rid of agents and most other personnel. Just digitizepolicy sales and claims. It’s part of the bigger trend of peer-to-peer firmsrapidly sprouting in various consumer sectors.

Dennis Jay wrote about Lemonade last week. I’m so fascinatedby the upstart startup’s P2P business model that I had to weigh in with my twocents worth.

Lemonade thinks its formula will lower fraud, blogs boardmember Peter Diamandis.

Policyholders can have underwriting profits donated tononprofits they choose. Insurancebecomes “a social good, rather than a necessary evil.”

People are less likely to try and bilk Lemonade, Diamandiscontends. Why would they defraud the insurer and thus reduce the charitydonations?

Many policyholders likely will be kind-hearted, as I see it.They’ll keep applications, renewals and claims sparkling clean for the good ofthe cause.

Two other classes of insured’s may be less charitable. Firstare the desperate ones. They’re average, everyday people whose finances aresagging. Maybe their home or SUV is near foreclosure, their bank accountnearing empty.

They’ll worry more about saving their own skins than whatmoney Lemonade sends to charity. If they can rifle Lemonade to bail themselvesout with false claims, their adrenalin-addled brains will impel them to pounce.They could, for instance, trash their car and claim it was stolen or wrecked ina hit-and-run.

Then there’s another class: the greedy.

Some of the greedy are everyday people. They’re notdesperate. Many are just opportunists. Maybe they just want to trade up to abigger diamond engagement ring, and tell Lemonade that, sorrow of sorrows, itslipped off the wife’s finger at the beach. Or double the cost of a soundsystem lost in a home fire.

Organized rings are another kind of greedy, often led bydangerous sociopaths. Fraud is their business, a science. They’ll studyLemonade and probe for weaknesses in the application and claims system. Justlike many crime rings test brick-and-mortar insurers when plotting stagedcrashes with mass injury claims.

Professional and amateur criminals look for weaklings toexploit, just like wolf packs stalking elk herds. My bet is they’ll try toinfiltrate Lemonade to see how much juice is for the taking.

Lemonade’s elysian P2P concept will appeal to tech-savvymillennials — and provide another choice in the marketplace. Maybe Lemonadewill inspire traditional insurers to tighten their own operations if they loselarge numbers of customers to its community-minded model.

Meanwhile, this trusting P2P business model likely will betested to the max on the mean streets. Here’s hoping Lemonade’s leadershipgrasp this truth, and develops new innovative firewalls to protect the companyfrom some very smart street criminals.