seanharper

The national flood insurance program shows one of the downsides with government participating in the private market (there are some plusses as well) - their rates were set too low, and that created a group of people who were politically motivated to agitate to keep them low. It's very hard to find the political will to raise insurance prices on those people, even though the majority of people/voters understand that it's a subsidy that doesn't make sense - first because its not fair, second because it encourages outsizes risk taking.

People will always be willing to pay a premium to live near the ocean. There are some places where that premium will be too high except the very very wealthy - living on a barrier island - for example.

In order to enjoy living in places where nature exact a larger toll - near the ocean, on a mountain that gets dry and doesn't have a fire station nearby - homeowners will need to invest in hardening their homes, invest in buying more expensive insurance and will need to make sure they have the financial buffer to rebuild if their home is damaged by the weather.

As the ocean rises, we will need to move more inland.

+1 for metal roofs -- I run an insurance company that specializes in high risk areas. Metal roofs are a superior technology to shingles and tiles.

In Florida Citizens is the largest homeowners insurance company and it competes vigorously with the private market.

The issue with Citizens is that it does create a lot of financial risk for the state, especially since it doesn't buy as much reinsurance as a private company would.

Here is a decent summary from one of the weather modeling firms about the impact of global warming on hurricane strength -- https://s3.us-east-2.amazonaws.com/kcc-mainwebsite-dev/publi...

The issue in Florida is also idiosyncratic to the state -- in addition to macro factors such as an increase in reinsurance costs (driven by increased cost of capital) and increased weather volatility (driven at least in part by global warming), Florida has had an issue with insurance fraud. They had a set of laws and court cases, unlike any other state in the country, that created a financial incentive for contractors to inflate (or make unnecessary) insurance claims. They would work in concert with litigation mills to further inflate the size of those claims. The way the laws were setup it often allowed the attorneys to get a 3x multiplier on their fees (which they would inflate to begin with).

So you would have a situation where a roof needed to be replaced, should cost $30k. A roofer comes up with an estimate for $60k (and maybe pays the homeowner back a $10k kicker), gets the homeowner to sign over the insurance policy to him. Then he hires a lawyer who spends $50k of his time litigating the case. Let's say the court sides in favor of the insurer and awards $30k, the lawyer still gets $150k (3x multiplier on the $50k of fees).

As a result you had Florida accounting for 8% of the homeowners insurance claims nationally and 75% of the lawsuits nationally. There are billboards for insurance attorneys EVERYWHERE in florida.

The phenomenon impacted big national companies like State Farm that have similar claims handling procedures across their book. So State Farm would handle claims exactly the same in Florida as in Illinois and get sued 10x more often in Florida because of the financial incentive to sue. It also impacts Florida's state-owned insurer, which does compete very vigorously in the market and is the largest insurer in the state.

David Altmaier, the former Commissioner of Insurance in Florida, wrote a good piece on that situation - https://floir.com/siteDocuments/ChairIngoglia04022021.pdf

Fortunately Florida took a really good stab at fixing the problem with some legislation passed last December. It will take a while to see if the legislation worked, however. Meanwhile we still have the macro factors (climate change, reinsurance costs) to contend with. https://bestsreview.ambest.com/edition/2023/february/Florida...

The issue in CA is idiosyncratic to the state. In 2020 the average price of homeowners insurance in CA was $1,241 and in Illinois was $1,144. It probably doesn't make sense for California to be only 8% more expensive than Illinois.

https://www.iii.org/fact-statistic/facts-statistics-homeowne...

Houses are more expensive in CA, building costs are more expensive in CA and the weather is more volatile (and becoming increasingly so) in CA.

The rate level in CA needs to increase. The regulator in CA makes it difficult to raise rates, so companies are responding by reducing their appetite.

I don't think that's a fair characterization of how pricing works in homeowners insurance. Every time you want to change prices, you need to justify the price change to the regulator using the actuarial math. The regulator's own actuaries review the actuarial math and, if they don't agree, will not change allow the rate change.

One of the hardest things about insurance is figuring out the probabilities of very unlikely events. Hurricane Andrew was a moderately large storm that directly hit three major population centers - Miami, Ft. Myers and New Orleans. That circumstance is infrequent enough that modeling it statistically leaves a wide range of uncertainty.

I would think about insurance as more of a smoothing mechanism of inherently uncertain outcomes. When something happens that's unexpected and causes a larger loss, that is typically recouped by the industry over a few years of higher rates. That way the industry is still absorbing volatility, which is valuable to their customers, but doesn't require that they be 100% correct about the probabilities of infrequent events.

I am the CEO of a tech company that provides homeowners insurance in hard to insure places.

I don't think it's really a bad thing for a company like Farmers to cut costs. Insurance companies are by and large pretty bloated from a cost perspective and could do to be more efficient, reduce overhead, use more technology.

It's very common for homeowners insurance companies to have expense ratios of 30-40%. So if you are paying $3000 per year thats ~$1000 EVERY YEAR that is being wasted on branches/agencies you don't visit and corporate overhead.

+1 -- Chicago is top 5 in startup/vc activity, has a number of big/successful tech companies -- groupon, orbitz, 37s, Braintree, etc. Google has nearly 3000 people there (including the 2500 or so from Motorola mobility). There is an active tech community lots of events meet ups, two top 10 national universities and 4 other large universities.

There are some expensive neighborhoods but also many cheap ones that are super fun if you are young and don't have kids or care about school quality.

Public transport here is ok - very extensive systems but some lines are pretty slow. Culturally we have everything you would expect of a very large city - great restaurants, museums, music, etc.

There is actually the capability to do an instant transfer over visa and mastercard networks as well, but it is somewhat expensive (>0.20) -- the pin debit networks are smaller and more willing to negotiate this sort of thing, and since most debit cards are able to process on more than one pin debit network you can get 100% coverage with just a couple of the pin debit networks playing ball.

That they are not allowing this for credit cards indicates that they are using the pin debit networks.

They are not using ACH for this, but rather probably using the PIN-debit networks such as star, interlink, nyce and accel.

Recently more so, for example they recently legalized concealed weapons, and the current VP candidate Ryan and also their current governor are both pretty extreme.

Historically Wisconsin has been a pretty progressive state, similar to its neighbors Illinois, Iowa and Minnesota.

Milwaukee, like most big midwest cities, is highly segregated with some pretty frightening ghettos and areas of poverty, although not as bad as cities whose economies have done worse like Detroit, Cleveland, etc.

Hey Conductr - we have been able to replicate the issue, it appears to only impact 1 merchant account provider. I suspect it has to do with something changing in their API.

Our focus has certainly been more on Samurai, especially since the acquisition, but the original site feefighters.com worked fine for many people last week.

Hello everyone -- this has been an interesting and painful conversation to watch. I am Sean, co-founder of FeeFighters.

Integrating the acquisition of a small company into a large company is hard. I suspect there are very few acquisitions where customers do not experience at least some pain. I am deeply sorry for customers who have had support tickets get dropped or experienced slow responses during this period of integration. We are working to smooth things out.

When we got bought, in addition to some personal stuff, like moving across the country (most of our team moved to Palo Alto, so we could all be together instead of distributed), we had to very quickly build additional functionality and scalability into our product to support the ambitious goals that Groupon has for our technology. Since we have been more focused on development and since Marc and Stella, who were doing a lot of our customer service, did not come along with the acquisition, our customer service has suffered.

It is really uncool how quickly other startups are to snipe at each other. We started a business, pivoted, built something valuable, sold it at a profit, and are now in an amazing position to solve the customer problems we initially set out to solve. If that resulted in you having a bad customer experience, it is perfectly reasonable to complain about it, and we are listening and working to fix it. But (Fred from Fleapay) why would you insult us by saying that we didn't build our product (we did)? And what do you know about why Groupon bought us? And what does Ayn Rand have to do with this anyway?

As always, if you are a customer and you want to talk, I am at sean@feefighters.

Hey everyone -- integrating a company after an acquisition is hard. Several of the people who were involved in marketing and customer support left as part of the acquisition, and we needed to spend a few months building up a bigger team, integrating with Groupon, cleaning up some technical debt and increasing the scalability of the product.

Excellent support is important for payments products and it is something we are committed to, but not something that we can deliver at the moment. Thanks for being patient during the integration period.

Sean (co-founder of FeeFighters)

Respect. Stripe is a very smart company solving a big problem.

Its not really fair to adjust for factors such as not taking time off to have kids. There are a number of biological reasons why it makes sense for women to be more involved in the early stages of rearing children than men (for example - only women can breastfeed).

For career focused women it is a very big problem that many career paths don't allow an easy way to take time off (or even just slow down a little bit) for children and then come back to reasonable opportunities.

I agree, turntable is really fun in a way that pandora is not, and the music selection is better (pandora keeps playing repeats for me and blending songs from one channel into the other channels).

I think it will be a hit.

However, I was logged in last night at 11pm CT. There was plenty to listen to, plenty of rooms to hang out in, but if you counted up the number of users in each room and summed them, it was clear that not that many people were actually online listening. I wonder if that indicates the app is not that sticky.

You are not giving Chicago a fair shake. I bootstrapped one company in Chicago and raised money from local angels and funds and coastal angels and funds.

Venture funding in Chicago has become significantly easier to come by than a few years ago, and much of your analysis of the city is a perpetuation of rather old stereotypes.

Sittercity, Grubhub, Braintree, GiveForward, Fango, Scholarpro, FeeFighters, Inventables, IfByPhone, BrightTag, PVPower, Centro, Vibes, Groupon and all the lightbank companies, Pawngo, Poggled, SproutSocial, Where I've Been, Local Offer Network, SoCore, TapMe, RedFoundry, yCharts, AnalyteMedia, Appolicious, FutureSimple, RedFoundry, CleverSafe, HoneyApps all raised real money at an early stage in Chicago.

Also, I don't understand why corruption would be a concern at all. If you are a tech company you are never going to need to bribe an alderman.

This is fascinating, and I would really like to try this at some point. However, I am 30, married and have a 1 year old kid. Does anyone have any similar resources, examples, for people who have done this with kid(s)?

Did you actually read dodd frank? Because you are completely wrong about what it says. The Durbin amendment to Dodd Frank is a reduction of interchange fees for debit cards issued by large banks. It impacts ~50% of debit cards, which are about ~30% of total cards, so 15% of cards in total. And it reduces those fees by 60-80% (so from around 1.5% to < 1%). As a result, it is a very minimal financial hit to the banks who ultimately receive the interchange revenues.

Furthermore, Durbin amendment will not survive. I will bet anyone on this - the banks are running a very aggressive FUD campaign which I suspect will work. It sucks, but that's what is what's happening.

Also, keep in mind that the fees being legislated by Dodd Frnak are the interchange fees that are actually the most significant expense for payments companies such as square, so it could improve their profitability a lot. It could also allow them to lower their fees and still make money, which coud increase adoption.

Durbin amendment, if it survives, is a positive for Square and every other payments company. It is a negative for the banks that ISSUE debit cards (basically Chase, Citi and BofA).

I think its debatable whether american apparel did well because they were vertically integrated / located in the US, or in spite of it.

Nucor is another example frequently cited as a company innovating in a shrinking industry. But they have had their share of troubles as well.

The terminology of payments is so weird:

Payment processors refer to their business customers as "merchants".

Entrepreneurs ALSO refer to their payment processors as "merchants".

I started FeeFighters, which is like Kayak for merchant accounts.

I have seen a lot of misery from folks who used the recurring API of the gateways (such as auth.net, braintree, etc).

If you are going to do recurring payments either roll your own using tokenization (its not that hard if your billing logic is simple), or use Recurly/Spreedly/Chargify.

A big advantage that a lot of people don't immediately recognize is that using R/S/C gives you a really good CRUD for your users/subscriptions/payments/etc. Building out that interface properly isn't a good way to spend your time (spend it on customer facing stuff!).

Pretty much every gateway has some kind of tokenization solution (or reference transaction solution) that accomplishes the same thing. They all call it something different and try to make it seem like it is unique, which can be confusing.

The default was set at the inflection point.

Search is so broken. The web was a better place 5 years ago, before Google started to lose to the seos and spammers.

There is no way that Cybersource + Wells Fargo is charging 1.45% for non-qual transactions. More likely they are doing something called Marking Up the Downgrades http://feefighters.com/blog/marking-up-the-downgrades/ where they quote a low "qualified" rate that only applies to a small minority of transactions.

The wholesale rates for credit card processing (called interchange rates) are available online at visa and mastercard's websites (search for "visa interchange rates"). Without getting into details, all card-not-present transactions, regardless of card type, are more than 1.45%.

Braintree's pricing is not the lowest, but I bet if you looked carefully at your statement from Wells you would find that it is worse than Braintree - some of the worst processing deals I have ever seen are from Wells Fargo.

If you want to make sure that your processor is not pulling funny business with downgrades, insist on Interchange Plus pricing (http://feefighters.com/blog/interchange-plus/). Or just a completely flat rate with no downgrades.

And then monitor it closely, this is one of the most crooked industries on the planet.

Yes it does cost them a lot less. The biggest expense Square faces is the interchange rate that it must pay to Visa/MC and they are much lower for swiped transactions.