Innovative Insurance Products Transform a Traditional Industry — and Find a Receptive Audience

Innovative companies are making headway — and turning heads — in traditional industries such as insurance, where they are finding a receptive customer audience for products that step outside the norm.

At Burnham Benefits, that means a recently launched a healthcare plan called B Healthy that is structured as a health insurance captive, under a self-insured plan arrangement, which is designed to help businesses partner with like-minded companies, reduce their financial risk, and gain control over their healthcare program. B Healthy is designed with values beyond profit: valuing worker well-being as part of the stakeholder mindset and innovating to maximize benefits while keeping an eye on cost.

Kristen Allison, President and CEO of Burnham Benefits, says programs like B Healthy allow companies to better tailor health insurance plans to match their needs. “Self-funding has the biggest opportunity to really be able to have meaningful and independent choices. If you go directly with a carrier, they give you their programs, and they mark them up,” she says. “It is not a one-size-fits-all with any company, but with the tools we have on the data, analytics, and big creative ideas and the constant curiosity on what works — that’s the driver.”

Burnham Benefits is shaping B Healthy with fellow B Corp Fors Marsh Group, which has been the first participant. As Alison Neilson, Lead Actuarial Consultant at Burnham, says: “They’ve had a very positive year, both financially and from a benefit enhancement perspective. That really was the goal and our vision for B Healthy: to save money by better managing claims, getting insight, and offering benefits that employees need. And also enhancing benefits where it makes sense.”

The enhancements include new offerings for mental health, infertility, bariatric surgery, and wellness. “All of these things they wouldn’t have been able to do because of double-digit cost increases that they were experiencing before,” Neilson says, crediting the collaborative nature of the Burnham workplace for nurturing innovative ideas that benefits clients and their stakeholders.

Another innovator in the insurance space is B Corp Lemonade, a startup insurer that builds its business on a give-back system that allows customers to select nonprofits that receive any unused premiums. Lemonade Co-Founder and CEO Daniel Schreiber says that by donating that money rather than keeping it as profit, the company produced more than $1 million in donations in 2020 (and over $2.3 million in 2021). It’s a practice that he says goes against the industry’s traditional relationship with customers.

“I don’t think about what we’re doing as being charitable in the traditional sense of the word,” he says. “We do give money to charity, we do partner with charities, and in so doing we are solving an absolute business challenge, which is that insurance companies are deeply distrusted.”

Lemonade has been able to build trust with customers looking for a new way to insure their homes and lives. Schreiber says Lemonade’s intention to do insurance differently gets at the conflict inherent in the product.?

“There is an asymmetry of power: You’ve given me the money; I have it. You feel disadvantaged because it’s not a level playing field. I’ve been collecting your premiums for the last 10 years, now you’re trying to get them out. There is an asymmetry of information: You don’t really know what the policy says; I do,” he says. “That’s what we were contending with in founding Lemonade: How do you create a trusting and trustworthy brand in a domain where the fundamentals of the business are designed for conflict of interest?”

While launching Lemonade, Schreiber talked with a Nobel Laureate in game theory and another with a Nobel Prize in behavioral economics. “We ultimately reached the conclusion that the problem isn’t with the players, it’s with a game. There’s something structural about insurance that produces these predictable results,” he says. “The fundamental problem is I make money by denying your claim. So I have a fundamental interest in you not being paid. I’m simplifying things, but it’s a zero-sum game: One of us is going to be $1,000 richer, one of us is going to be $1,000 poorer, and so long as that’s the case there’s a problem.”

Schreiber says incorporating a new component — the Giveback program — serves as a game-changer. “By adding a nonprofit to the room, we change the very fundamentals of the dynamics and other incentives. We tell you up front that our profit is not going to depend on how many claims we pay,” he says. “If there’s money left over, it’s going to go to a charity of your choice. That changes my incentive, because I don’t make money by denying your claim.”

Like Burnham Benefits, Lemonade is showing that it’s possible to incorporate a stakeholder-minded and profitable way of doing business in a traditional industry, and find a receptive and appreciative customer audience. “I do think that people should work hard at creating that kind of win-win,” Schreiber says. “It’s good to be able to build a business model where the act of giving something to the wider community isn’t at the expense of your shareholders.”