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Lemonade

Insurance driven by AI and behavioural economics

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Lemonade is reinventing insurance to be instant, easy, and transparent. It offers home insurance powered by artificial intelligence and behavioral economics. By replacing brokers and bureaucracy with bots and machine learning, Lemonade promises zero paperwork and instant everything. And as a Certified B-Corp, where underwriting profits go to nonprofits, Lemonade is remaking insurance for social good, rather than a necessary evil.

Lemonade is led by Daniel Schreiber, a British-trained lawyer, who was previously SVP corporate marketing at Sandisk where he was in charge of the press relation and social media. He then became president at Powermat, where he oversaw major transformations in the industry and various features for top brands like Samsung, Starbucks and GM. He also co-founded content security company Alchemedia.

In 2015, Schreiber and tech entrepreneur and inventor Shai Wininger founded Lemonade. Schreiber believes the current insurance model is outdated, frustrating and brings out the word in people. Quoting data from the Insurance Research Council, which suggests that insurance fraud costs an average family around $1300 yearly.

Lemonade prides itself as being a gamechanger in the insurance industry. He sees technology as the way going forward “We’ve got over a quarter million customers but less than 100 employees. It’s about using technology to do stuff that humans would otherwise be doing so that as we scale our company, there’s continuously innovation and processes that we try to automate both to collapse time and the hassle for customers and to collapse cost concurrently.

Schreiber told Business Insider that “Insurance companies make money by disappointing their consumers. It’s difficult to think of another sector where that’s true. But if they delighted all of their consumers, they’d go out of business, because the way insurance providers make money is by denying your claim. Insurance companies now are justified in treating them with suspicion, and that spirals onwards and downwards.

“Lemonade was founded on the idea that the current state of the insurance industry was frustrating, outdated, and brought out the worst in people,” says Schreiber. “Lemonade, built on AI and behavioural economics, is trying to change that. We’ve seen that a whopping 90 per cent of our consumers are first-time buyers. This means they did not have insurance before, and now they need coverage for their stuff and a home! The extraordinary benefits of having simple and inexpensive protection versus not having any coverage is significant.”

Like most startups challenging the increasingly creaky financial institutions, Lemonade has a familiar advantage: it’s nimble. Users (currently limited to certain states in the US) can make claims via their smartphones, and because the company only employs around 30 people and uses algorithms to process claims, it can make decisions more quickly, for less money. On top of that, Lemonade takes a flat fee out of its customers’ monthly payments which it uses to pay out on claims, taking away the traditional incentive for an insurer to deny claims to save cash.

 “We have bots instead of brokers, and an app instead of paperwork. You can get insured in seconds, and get your claims paid in minutes. Insurance shouldn’t be more difficult than that. In fact, we recently reviewed, approved, and paid a claim in three seconds, setting a world record for fastest claim ever.”

There’s one more part in Lemonade’s pitch to potential customers that’s a little more left-field: when you sign up for its service, the company asks you to pick a charity. And then at the end of each year – if you and other supporters of the same cause don’t make too many claims – a portion of the money that you have paid to Lemonade is then passed on to your chosen nonprofit, as part of what Lemonade calls ‘Giveback’.

Lemonade is designed differently. Powered by technology and transparency, you can get homeowners and renters insurance fast and simply, all from the comfort of your phone. Say goodbye to paperwork and agents, file claims instantly, and choose a cause you believe in to giveback money to at the end of the year:

Here are Lemonade’s co-founders Daniel Schreiber and Shai Wininger, together with Lemonade’s Chief Behavioral Officer Professor Dan Ariely, explain the science behind Lemonade, a new kind of insurance company replacing brokers and bureaucracy with bots and machine learning:

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