Lemonade: Disrupting Insurance with Instant Everything, Killer Prices, and a Big Heart - Case

Abstract

Launching its first products in the fall of 2016 in New York, insurtech startup Lemonade was on a mission to disrupt the insurance market by using AI and behavioral economics principles. The company offered renters, homeowners, and condo insurance and mainly targeted millennial, tech-savvy individuals with relatively few assets—customers who were less attractive to traditional insurers who had costly, labor-intensive operations. By offering a delightful, bot-driven consumer experience, embracing a model that removed any incentive to deny claims and that let customers pick causes to donate leftover money, building a loveable brand, and employing creative digital advertising—the company was able to grow at an impressive pace. By the end of 2018, Lemonade was active in 24 U.S. states, had insured 425,000 customers, and was expecting sales (gross premiums) of over $57 million.
In an effort to sustain the spectacular growth momentum, the co-founders sought to pursue ambitious plans in 2019, including the launch of new insurance product lines as well as international expansion. But limited resources and scarce management bandwidth suggested that taking on both moves simultaneously could be highly risky. In deciding which path to take, the leadership team had to consider whether it was more important at this stage to scale globally with the current product lineup or to cover a breadth of insurance categories and stay in the U.S. for now. Assessing the relevance of the business model and the role of AI for each of these moves, understanding the nature of consumers in different markets, and foreseeing competitive pressures from both incumbents and startups were key in making the right call.

Keywords

AI; Business Startups; Insurance; Technological Innovation; Business Model; Disruption; Brands and Branding; Growth and Development Strategy; Global Strategy; Decision Making; Insurance Industry; Technology Industry

Citation

Ofek, Elie, and Danielle Golan. "Lemonade: Disrupting Insurance with Instant Everything, Killer Prices, and a Big Heart." Harvard Business School Case 520-020, August 2019. (Revised March 2022.)

FAQs

What are the cons of lemonade insurance? ›

While it offers some coverages not usually found with renters insurance policies — including property damage caused by pets — Lemonade does not offer coverage options for personal business property. It also does not offer identity theft protection, a common inclusion among some competitors.

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Does Lemonade actually pay out claims? ›

Lemonade is a fully licensed and regulated insurance company, which means that we underwrite, price, and sell policies, as well as handle and pay claims.

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How is Lemonade disrupting the insurance industry? ›

On the business side, one can have the same perspective on its potential; Lemonade creates an insurance ecosystem that empowers cross-selling activities, and attracts young customers with simple and digital insurance with a high NPS score and a customer experience parallel to tech companies.

How is Lemonade using AI to disrupt insurance? ›

Lemonade is revolutionizing the insurance industry by leveraging advanced technologies like AI, machine learning, and behavioral economics to replace the traditional brokers with a business model that prioritizes efficiency, featuring zero paperwork and instant processing.

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Can I trust Lemonade? ›

We at the Guides Home Team found that Lemonade stands out as one of the best homeowners insurance companies in the industry for its unique claim-filing process that uses a mobile app with artificial intelligence (AI) technology to process information and make payouts to homeowners seamlessly and hassle-free.

How do I get rid of lemonade insurance? ›

How to Cancel Lemonade Insurance via Email

Type up a cancellation request email and send it to help@lemonade.com.
Be sure to provide the following account information: Full name. Lemonade Account Email. Policy number. Effective Cancellation Date.

May 5, 2024

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What is so special about lemonade insurance? ›

Originally founded in 2015, Lemonade claims to be the first "peer-to-peer insurance company" in the world. The firm bases this claim on its unique business model that charges users a flat fee for services and uses the rest of company funds to pay claims and run their business.

What is the story of lemonade insurance? ›

Lemonade Insurance was founded in 2015 by current CEO Daniel Schreiber, Shai Wininger, and Ty Sagalow. The company received $13 million in early investment capital from Sequoia Capital and Aleph, and subsequently raised more than double that amount in Series B funding in 2016—a rarity for insurance companies.

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How is Lemonade different from other insurance companies? ›

Lemonade is a public benefit corporation and employs a program called Giveback. This means that when most major insurance companies keep leftover premiums as profit, Lemonade donates these extra funds to the charity of your choice.

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Why is Lemonade insurance so cheap? ›

How is Lemonade insurance so cheap? Lemonade claims to offer car insurance policies for as low as $30 a month. The company collects location-based data and your safety score to price your premium, and it leans on artificial intelligence to handle and pay out claims.

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Why can't Lemonade insure my property? ›

In order to build our business for the long-run, we choose to focus on certain types of properties, which means we can't insure every type of property.