Business InsiderDuke University behavioral economist Dan Ariely thinks that if you sought out a system designed to bring the worst out of people, it would look a lot like modern day insurance.
The whole relationship between client and company is "adversarial," he tells Tech Insider. Clients feel like they're going to be screwed over, and companies assume clients are going to cheat, leading to higher rates. Plus, there are conflicts of interest.
"In conventional insurance, you give someone money every month, and when you submit a claim, they have some process to get it back, but it’s their money," says Ariely, author of "Predictably Irrational" and "The Honest Truth About Dishonesty: How We Lie to Everyone — Especially Ourselves."
"If they give you more money, the people who work at these insurance companies’ bonuses are going to be lower," he adds.
That's why he's joining the insurance startup Lemonade as the Chief Behavioral Officer. The insurance startup has brought in $13 million in initial funding, including from heavyweight Silicon Valley venture capital firm Sequoia Capital.
Lemonade aims to be the world's first peer-to-peer insurance carrier, meaning that funds contributed by members are shared communally. A Lemonade spokesperson told us that "there will always be enough money to pay claims" because the startup has lots of reinsurers, including Lloyd's of London.
"Lemonade is saying, this is not our money," Ariely says. "It’s really your money. We are the custodians of this money. We will not make a penny more if we deny claims. at the end of the day, the pool belongs to everybody. And if it gets poorer, it gets poorer for everybody."
Ariely is no stranger to startups. He was an advisor for the early search engine tool Simpli, which sold to NetZero in 2000, and on the founding team of the productivity app Timeful, which sold to Google in 2015.