Comment by jawns | Hacker News Reader

Comment by jawns | Hacker News Reader

Wait, is Goodcover an actual cooperative, as a business structure?

Because that has a specific meaning, especially with regard to insurance. (And there are a lot of mutual insurance companies out there that are genuinely, 100 percent member-owned.)

But you mention venture capital and a rate of return for your capital partners.

So how is Goodcover what you say it is? Sounds like a for-profit company to me.

Saying you operate as a co-op when you're actually a for-profit is like saying you operate as a non-profit when you're actually a for-profit.

Ultimately, if you have outside investors, you've gotta make them money. If that's true, then suggesting you're operating as a cooperative is misleading at best.

EDIT: I looked at the legal notices section of your site, and this ain't a cooperative in any shape or form.

* "Goodcover takes a fixed fee - currently 20% of premiums."

* "Whether a Dividend can be paid is up to the discretion of Goodcover’s board."

This is absolutely a venture-backed, for-profit company that is describing itself as a "member driven cooperative." I would not be surprised if legal issues arise because of this misrepresentation, because California treats cooperatives as a distinct legal structure. (For instance, it's illegal to have the word "Cooperative" in your business name if you're not incorporated as a co-op.)

That's not entirely true. There have been a number of innovations in cooperative structures. For instance, many cooperatives need capital to get off the ground, or they're a capital intensive industry like insurance, and they'll introduce capital investors but they don't get voting rights.

It's not all that different than taking a business loan which requires repayment of the capital - but the bank doesn't have voting rights and doesn't attend board meetings.

I'm curious to hear more about Goodcover's structure, too, like what rights do members have beyond dividend returns. I've, personally, always thought that my needs from insurance companies are significantly lower than many peoples. The thread below about 4+ years of expenses paid absolutely blows my mind. I would _never_ expect my insurance company to do that and I'd hope to get proportionally lower premiums.

My hope for the proliferation of cooperatives is to provide more diverse offerings in every industry and combat the consolidation that we're seeing everywhere. That said, I understand that the insurance industry is under a tremendous amount of regulation (for good reason) and I might make bad choices as a consumer.

One of the other perks of cooperatives is their commitment to benefiting members which could include much better education and support around policy options.

Thanks for your question, it's an important one, and deserves more than a handwave answer. When we started Goodcover, our goal was to make it so we were not in conflict with our Members - and the core of this is a cooperative model.

The original business model we were looking for is known as a "Reciprocal Exchange" (RE) - a type of co-op or mutual (like you mention) where the members own the claims capital, but the business is managed by a company called an "Attorney in Fact", which is usually a for profit (Farmers is an example). That would be us - we’d make money providing an amazing service to as many people as possible.

Unfortunately, we found out from the CA regulators very early on that starting a Reciprocal Exchange today was basically a non-starter. The capital requirements I mention in "Quirk 2" mean we can't just raise money from somewhere and kick-start the RE. We would need to get future-subscribers to put up the cash, and the amount we were talking there was just not possible. Farmers started in 1928 with a loan for their backend capital, something that is illegal today. So we were stuck - how do we start a new co-op insurer given this requirement?

The above story is the process of us figuring that out. Goodcover is an MGA that manages insurance on behalf of its Members, like an Attorney in Fact does for an RE. However since we can't have an actual RE until we have sufficient number of Members, we rent the capital backstop from conventional carriers. They pay us a fee and return the "underwriting profit" to us (that part is even more complicated and can talk later if you want), which we then return to Members, like Farmers should, but doesn’t anymore.

So, long answer - but yes, we are a for profit company. We operate the insurance like a cooperative, but like many other coops we do that for a for-profit fee. But, given the regulatory environment today we don't really look like your 1920s co-op!

Thanks for sharing this extra detail. Your industry is obviously much trickier to navigate than the service industry our worker co-op is in.

Do your members get any voting rights or other feedback mechanisms?

No problem, it's important I think. It is a heavily regulated industry so we always have to be mindful of what is legal, what is going to get regulatory approval, and what we actually want that will serve Members the best.

On voting rights - we haven't worked out how to legally do so, but we're experimenting with ideas over how to give the community more control. Would love to brainstorm ideas! Feel free to reach out, chris @ goodcover com

>> we don't really look like your 1920s co-op!

Thats is not good marketing -- do you want customers to believe that you are the only innovation that happened in the field of _insurance_ (worth what, many trillions of dollars a year? ) in 100 years?

That sounds like a scam. You may want to change the pitch, just my 5c.

Thanks for the feedback, that's not my intention. We're definitely not claiming we're the only innovation in 100 years.

However the environment those companies started in is gone. Insurers went in and out of business all the time in the 1920s and 30s, it's the survivors who are left (I think it really is amazing how many of the top insurers started in the 20s and 30s!). It's good there's more regulation and safety for insureds.

It does mean though we have to work in the current framework to get things done - the companies of the 1920s can't be started the same way in the 2020s.

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