Here are two words you don’t often hear in the same sentence: revolutionary and insurance.
But that’s exactly what experts are calling a new peer-to-peer (P2P) insurance concept presented by startup Lemonade. Though the company has yet to open its doors, the adjective-laden praise has commenced. Bankrate muses that Lemonade may become the “the Uber of insurance” and Sequoia Capital’s Haim Sadger says his firm’s investment in the company was a no-brainer because “we’re betting that Lemonade will transform the insurance landscape beyond recognition.” Heady words from a venture capital firm that helped launch one-time startups Apple, Google and LinkedIn.
Lemonade recently secured $13 million from Sequoia and others in seed funding, which may not seem like much in the mega-billion dollar insurance industry. However, here’s some perspective: Uber’s initial round of funding garnered just $200,000, and the top seed investment amount in 2014 was $10 million for an analytics business named Kensho. Now you can see why many are calling Lemonade the next big thing.
The Bankrate article points out that a P2P insurance model usually involves a small group of policyholders who pay premiums into a claims pool. If there’s money left in the pool at the end of the policy period, members get a refund. However, it’s a costly format to get going. While this approach is relatively new to the U.S., similar P2P models have started – and succeeded – in other countries, including Germany (friendsurance), the United Kingdom (Guevara) and China (TongJuBao).
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While Lemonade’s founders, Daniel Schreiber and Shai Wininger, have not yet disseminated much information about how their company will operate, their branding already feels different from the rest of the industry. “The world’s first peer-to-peer insurance carrier. We’ve redesigned insurance from the ground up to make it honest, instant and delightful,” proclaims the headline (and currently, the only content) on their website.