At Whippet, we’re always keeping an eye on what’s happening in Financial Services both here and around the globe. Recently we spotted this innovative insurance product that’s been gaining some traction. Founded way back in 2015 and launched last year, Lemonade offers the first peer to peer home owners and renters insurance for New York City residents.
Lemonade is an online only company that automates as many services as possible to keep their costs down. They’ve created algorithms that make it quick and easy to sign up and approve claims in minutes (rather than days), a huge advantage in a market where ease is crucial. Many companies claim they do it, but few deliver. Lemonade pulls data quickly and cross-references information on a particular home or neighbourhood from a variety of sources – reducing the need for the company to ask the customer a lot of questions.
Another techy solution Lemonade has implemented is the introduction of a couple of chatbots (based on two of their employees) who are able to speak with customers by phone and handle more complex cases. Now these AI initiatives are up and running, this also keeps operating costs low.
Crucially, Lemonade operates a mutual insurance model, where customers are charged a flat fee combined with a variable premium. The profit for Lemonade lies in the flat fee, not the premium. The premium is added to a ring fenced fund in order to pay claims, with any unused funds redirected to local charities and good causes (‘Giveback’). This means Lemonade gains no benefit from avoiding claim payouts, so they pay quickly – which generates real trust with their customers. Giveback also helps to minimise fraudulent claims, as customers are less likely to make a fraudulent claim if part of the money is being raised to benefit their immediate community in some way.
Lemonade is trying to turn the insurance model on its head by using technology and behavioural science to create a faster and more transparent service… and the brand design is quite nice too! We’re fascinated to see how it grows in this highly competitive and cost sensitive market. Will it go flat or keep its fizz?