Treat your competitors fairly

Once upon a time insurance was a brilliant, original idea. Money was paid in return for the transfer of a risk, mainly between wealthy merchants who knew and trusted one another.

The practice allowed more business to be done because finite capital was used much more efficiently. More ships sailed, more hi-tech factories and their dangerous, explosive steam boilers were able to be built. People became wealthier and society fairer as a direct consequence.

Thank goodness no-one patented the idea and sought to enforce it. If that had happened, the inefficiencies of a virtual monopoly would have been a massive break on the explosive growth and increase in living standards of the industrial revolution.

The point is that insurance might be a brilliant idea, but it is a fiendishly simple one and it is easy to copy.

As a broker, I remember sweating with a London underwriter over a Spanish liability wording. The bilingual process took 18 months. It was expensive and intellectually – as a well as legally – challenging as we were bashing together two very different legal codes.

But eventually we got something that pleased everyone and that our lawyers said was compatible with Spanish law. We were glad when our Spanish cedants adopted it.

But imagine my shock when two weeks later I was queuing at a Lloyd’s box and saw a rival broker with a faxed copy of my wording, still sporting my broking house’s logo, as he sought a quote for a Spanish client.

I was annoyed but seniors at my firm were relaxed and saw the bigger picture. We had designed the wording to facilitate the transfer of risk between Spain and the London market and that is exactly what it was doing. I know this wording is still in use today, in many countries in Latin America as well as Spain.

Lemonade understands this concept well. A matter of weeks ago, it made fanfare of releasing its own renters wording on a wiki and seeking feedback. In this context, its suit against WeFox looks like a simple disruptive nuisance claim. In insurance, you cannot patent the way you do business and you cannot deny competition.

In the Spanish case, our wording was directly stolen. Lemonade’s code has not been stolen – merely its attractive edifice has attracted some admirers. The rubberneckers can look all they want, but they do have to work out for themselves how the master put the original together.

And when they do, it will be their own work.

Customers around the world will benefit, as will Lemonade, as its competitors help expand its addressable market.

Lemonade must learn that in the insurance ecosystem, you have got to treat your competitors, as well as your customers, fairly.