That doesn't sound right -- a claim should be paid out or denied based on the veracity of the claim, not on the profit motive of the company. Sure, a for-profit company has extra incentive to vet claims, but so does Lemonade (since they dont want to be swindled).
Traditional insurance companies make their margins on the cash they have to hold on hand.
They're capitalizing on the lack of trust people have for typical insurance companies. Even though a claim "should be" paid out based on the veracity of the claim, I think there's a population that doesn't trust the insurance company to operate this way.
I'd agree with that. There's a general feeling that people are surprised when their insurance companies pay out/cover some big cost (like rot), rather than it just being part of life. That says something about how much we trust existing insurance companies.
Traditional insurance companies make their margins on the cash they have to hold on hand.