Open source insurance coverage?
In a recent press release, Lemonade announced the launch of the "world's first 'open source' insurance policy." Before we get into the "open source" issue, here's a refresher on who and what Lemonade is. In the press release, the company defines itself as:
"Lemonade Insurance Company is a licensed insurance carrier, offering homeowners and renters insurance powered by artificial intelligence and behavioral economics. By replacing brokers and bureaucracy with bots and machine learning, Lemonade aims for zero paperwork and instant everything. As a Certified B-Corp, where underwriting profits go to nonprofits, Lemonade is remaking insurance as a social good, rather than a necessary evil. Lemonade is currently available for most of the United States, and looks to expand globally."
See more at the company's website, which encourages you to "forget everything you know about insurance." The company states that its intent is to make insurance simple, fair and accessible to everyone. In that spirit, it has posted Policy 2.0 on GitHub, inviting everyone, competitors and regulators alike, to share in crafting and building the ideal policy. GitHub is a popular collaborative tool used by software developers to create open source code. (Policy 2.0, a renter's policy, is also accessible on Lemonade.)
"Open source" is generally a term associated with software. Wikipedia describes it as a "collaborative development from multiple independent sources, generates an increasingly more diverse scope of design perspective than any one company is capable of developing and sustaining long term." Jordan Crook of Tech Crunch offers more perspective on what "open source" means in this context in the article, Lemonade wants to rewrite the insurance policy itself.
"But, in a little bit of a twist, Lemonade is open-sourcing the policy on GitHub. Anyone, from state regulators to consumer advocacy groups to Lemonade competitors or even interested customers can make edits and contributions to the policy. Plus, Lemonade is opening up use of the policy to other insurance providers under the GNU’s Free Documentation License."
Crook notes that regulators are expected to be one hurdle since much of the language in the 10,000 word policy is required by law. Is open source a concept that will translate to insurance?
Bill Wilson, retired associate vice president of education and research at the Independent Insurance Agents & Brokers of America, is one of the first in the industry that we've found who weighs in. He offers a scathing critique of Lemonade's "open source" homeowners/renters policy. He goes under the hood to look at what the base policy offers and finds it lacking. In essence, he makes the case that when it comes to insurance policies, the devil is in the details and the details are complicated, by necessity. He takes issue with the non-specific nature of the language, citing numerous examples. See Making Lemons From Lemonade.