The company is headquartered in New York City, and is currently focused on selling renters’ and homeowners’ insurance products there. Also pivotal to the Lemonade model is the idea that unspent premiums will be funneled back into the community through philanthropic initiatives.
“Technology drives everything at Lemonade” Shai Wininger, the company’s president and co-founder, said in a press release about the launch. “From signing up to submitting a claim, the entire experience is mobile, simple and remarkably fast. What used to take weeks or months now happens in minutes or seconds.”
What remains to be seen is whether a business such as Lemonade can manage the same level of personalized financial and estate planning advice as professional agents and advisors.
Lemonade says its mobile technology can provide consumers with policies at a fraction of the cost of what competitors offer. Homeowners’ policies start at $35 a month, and renters’ insurance starts at $5 a month. Though the company has not announced plans to move into the life and health insurance space, it would seem a natural extension of their current product offering — or could perhaps become the focus of a competitor.
LifeHealthPro spoke to Lemonade CEO Daniel Schreiber (seen here at right) by telephone Wednesday to find out more about the effect his team hopes to have on the insurance business.
What follows are excerpts from a 15-minute telephone conversation:
In this video, Lemonade co-founders Daniel Schreiber and Shai Wininger, together with Lemonade’s Chief Behavioral Officer Dan Ariely, explain the science behind Lemonade. (YouTube)
LifeHealthPro: What was involved in getting Lemonade to this launch milestone?
Schreiber: We founded the company just over a year ago, in June of last year. We’ve had to build everything from scratch. Fortunately we have a very unusual and eclectic team in place, from technology and behavioral science and insurance; not the kind of people you often see under the same roof. Even my partner, Shai Wininger, is a pioneer in the product development space. So that was one piece of it. Next, everything we developed on the technology side has been from scratch. That’s a pretty significant departure from what is commonplace in insurance today. [We designed software for] everything that’s happening behind the scenes, including generating policies and underwriting claims. And the there’s third leg of the business, which has been the regulatory side. New York State regulators are very exacting. So getting to the point where we could get licenses was a big step as well.
LHP: You’re launching with renters’ and homeowners’ insurance policies. Are there plans to expand your line of insurance products?
Schreiber: I wouldn’t say that we have plans as much as we have aspirations. Right now, we want to make a success of what we’ve launched. All of our efforts right now are on homeowners and renters in New York. Our aspirations are expansion, but I can’t speak to that right now.
LHP: Why launch Lemonade in New York?
Schreiber: There were a couple of reasons. First, it’s the financial center of the nation, and it’s where financial revolutions can take place. Also, it has a technology- and forward-thinking population. These are people who are receptive to our message. On the regulatory side, New York is conceived as the toughest of the 50 states. We figured if we can satisfy regulators in New York, we can satisfy them in the other states as well.
Here, during a panel disussion at the Future of Fintech conference in June 2016, Lemonade CEO Daniel Schreiber elaborates on his company’s theory that the insurance industry was ripe for tech-driven innovation. (YouTube)
LHP: You’ve been quoted as saying, “There’s something profoundly broken in the world of insurance.” Why do you think the insurance industry is prime for disruption?
Schreiber: As an entrepreneur, what was attractive to me and my co-founder are three things. First of all, it’s a huge market. Entrepreneurs and investors are always looking for huge markets, not just in terms of dollars but also in terms of people. Perhaps more extraordinary, [the insurance industry is] largely unspoiled by innovation. Many legacy companies are more than 100 years old. So this construct that today reigns in the world of insurance is a byproduct of the industrial revolution. It’s very difficult to change once you’ve established a business and reached the scale that the incumbents have reached. Also critically important is the fact that no one’s happy with [the industry]. Insurance is not a respected sector. Insurance brands have not succeeded in convincing consumers that they’re trustworthy. Most consumers consider insurance to be a necessary evil. As far as entrepreneurs are concerned, that’s a huge opportunity. It’s an industry that just begging for a makeover.
LHP: What do you think consumers want most from an insurance provider?
Schreiber: There’s a telltale sign; a canary in the mine. We, as consumers, often behave poorly. Twenty-five percent of Americans say that it’s OK to embellish insurance claims. Now, fraud is a huge problem in commerce in general. But in most cases, it’s a criminal enterprise. With insurance, over 90 percent of the fraud is perpetrated by supposedly normal upstanding citizens like you and me. So what is about insurance that brings out the devil is us? Why is it that when it comes to insurance, we feel entitled to break the law?
If you strip it all down to the root cause, this is a business built on a conflict of interest … Insurance companies make money by disappointing the consumer [by not paying claims]. It’s not a question of being bad people. It’s the question of a system that has a business model with an inherent conflict of interest.
We feel that [innovation in insurance] has to be systemic. So we’ve developed a Ulysses Contract [as part of our business.] In the story, Ulysses was drawn to siren’s song, even though he knew it was dangerous. So he tied himself to the mast of his ship [to keep himself from diving into the ocean after the siren’s, and certain death.] … Our message to our customer is you shouldn’t trust us because we say we’re good. You should trust us because we’ve tied our hands. We have a system that doesn’t allow us to make money by denying claims.
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