Feb 11, 2020 | 7 min read

What We Can Learn From Lemonade: an InsurTech Case Study

Pavel Kaplunou , Marketing Communications

Insurance operators have been the slowest in adopting information technology and digital transformation. All the while the fintech space is bustling with innovative ideas and insurance development companies. Lemonade is one such new kid on the blog that has taken a technology-first approach in its business model. Something that older players lack. What exactly makes Lemonade so notably? Let’s have a look.

A recent McKinsey financial services overview shows that insurtechs are moulding a new look at how traditional insurance companies. Such technology-driven companies have the upper hand and steadily capturing market share. Operators of insurance services are being forced to adapt new approaches or face the imminent threat of becoming obsolete in the face of a digital revolution. 

 

What is Lemonade and how does it work?

Lemonade’s domain is renter and homeowner insurance, meaning it supplies everything from reconstruction costs, personal property damage, personal property theft, loss of use and legal liability.

So Lemonade is an insurance company. Or is it? As Shai Wininger, the company’s co-founder, himself states, “Lemonade is a tech company doing insurance, not an insurer doing an app”.

Subscribers use a mobile up in order to register and sign up to the service. Claims are filed with an in-app chatbot. There’s no paperwork involved whatsoever. The software behind the application is powered by AI. It processes the claim in as little as 3 minutes or less, notifying the user of the result. Some claims have gone through in under 3 seconds.

The company, founded in 2015, made its market debut in 2016 on Product Hunt, an atypical choice for a company that operates insurance claims. It went live with a peer-to-peer insurance provider model, wherein claims would be paid from a pool of all the premiums paid. It’s monthly subscription plan and P2P model allowed it to keep premiums low, all the while making its offer very attractive for insurance seekers.

The financial services review website, DoughRoller, cites a Millennial Approach is part of the explanation for Lemonade’s success. Everything from its color palette, choice of words and mobile-first, chatbot-based service speaks to a generation Z audience. 

At the same time, it does little to deter the traditional insurance consumer. Not only the app, but also the company’s website seeks to level with its users and make insurance available for all by offering a concise FAQ and how-to section.

 

A technology-first approach

Being an insurance software development company, rather than a traditional insurer, the team at Lemonade have made sure that technology is at the heart of the business. Consumers do not have to talk to company reps, file paper claims, receive rate hike ups, or limit their purchases.

 

Chatbots and AI 

The sophisticated chat feature is responsible for automated claims processing. This means that whatever the case, the conversation flow will take you through the process in a breeze.

By never having to interact with a human the chatbot approach also brings misunderstandings to a minimum. The streamlined and automated process makes sure everything is no more complicated than it has to be at every step of the way.

No to paper filing

In the interim of filing a claim, a Lemonade user will be given the opportunity to forego filing out a detailed paper claim. This is substituted in favour of a faster and more convenient video recording that is sealed with the users e-signature upon recording. 

Not only does this save time for both parties, it also avoids the red tape of traditional insurers and eliminates paper waste altogether.

 

Adjustable deductible rate and premiums

Lemonade insurance users provide details according to several criteria that lets the AI determine the initial premium rates. Policyholders can also move their premiums up to reduce deductibles (the sum that will be subtracted from their filed claim amount) or the other way around. This flexibility gives not only allows users to select a plan that works for them, but also reassures them that they are, in fact, in control of their money.  

What is more, lemonade charges a 25% flat free from premiums to cover costs. The rest goes towards paying claims and purchasing reinsurance. Sometimes this can imply that a remainder is left. 

 

API

Like many SaaS companies, but unlike many insurance companies, Lemonade offers an API. 

In commerce, online shoppers can insure valuable purchases at check-out. Modern property and real estate agencies can integrate the service into their website to automatically cover tenants. IoT platforms, like smart home security systems, can track valuables and offer full protection of personal property.

These are just a few use-cases of where the API can be applied. If and when Lemonade decides to expand its business or its partner network, you can expect to see the company logo pop up on more sites.  

 

Social good initiative

The company’s blog is where it upholds its Transparency and Honesty policy. Using technology to power its entire service means the company gathers enough data to make actionable conclusions and develop the business further. One way it does the latter is by sharing that data directly with its audience via its Transparency Chronicles blog section.

Where the company’s initiatives truly shine is perhaps its Giveback programme. Once it underwrites profit from premiums, the rest goes towards charity. A multitude of charities are available for support. Users get to choose a cohort, for which the company forms a Giveback pool.

Not only does it appeal by presenting a handy and convenient mobile application, but also by putting a human face on it.

 

There’s always money in the lemonade stand

Lemonade is but one example of how insurance technology can develop. Even though it currently holds around 10% of the entire real estate insurance market, it can stand its ground. It has even become an A-Exceptional rated insurance company with what is considered to be an up and coming insurance market.

Other insurers such as Geico, State Farm and Liberty Mutual have been leaning more and more towards technology to power their insurance solutions in recent years, but the market has yet to experience a genuine revolution. 

Other startups in the fintech sector like AfrikaLoan, for which Smart IT developed the backend and mobile API have relied on similar technological solutions to power their business, albeit in the sphere of microfinance. Chatbots have also become a staple of most modern solutions. From online doctor appointments to messenger-based or online sign-ups to fitness coaching sessions.

Many opportunities remain untouched, despite being ripe for the taking. If there is anything that Lemonade proves is that even complex services can be made easy and accessible through the use of technology. Just imagine how auto insurance, something that’s not part of Lemonade’s coverage, or P&C insurance for select groups of people could benefit from an automated service.

To be in step with the times, insurance operators and coverage providers will need to make better use of modern technology. With more and more technology-oriented companies that are slowly pouring into the insurance space, traditional companies will have to initiate change by either upgrading legacy systems or pivoting their business around proprietary platforms to accommodate for a new era of insurance technology services.

Disclaimer: Smart IT is in no way affiliated with Lemonade Insurance Company and has produced this post for informative purposes.

11 February 2020

WRITTEN BY

Pavel Kaplunou, Marketing Communications

Pavel is Smart IT's Marketing Communication Manager. He oversees content creation and is in charge of the official Smart IT blog. Contact Pavel to learn about potential media and content collaborations. p.kaplunou@smart-it.io

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