[nerdponx]

They're not adding 20%, they're charging you a flat 20% and then paying for the policy on the back-end.

In that sense, it's like a buyers club for insurance. Lloyd's isn't insuring every Lemonade customer individually, they're insuring the entire Lemonade business, which with enough buy-in becomes a very diversified risk pool.

[h4nkoslo]

I'd be really surprised if their entire risk was reinsured; that tends to lead to severe incentive misalignment since they would have every incentive to sell to the riskiest customers they could find.

[nerdponx]

Good point. Although again, adverse incentives on Lemonade's side are supposedly handled by the fact that they're a nonprofit.

[SmellTheGlove]

I'd be really surprised if they could get reasonable terms to reinsure their book, good decision or not.

[gilsadis]

that's well said!