Challenger to Watch: Lemonade Insurance

For introducing 'trust' to insurance

If you asked me a year ago who my favourite insurance company was you would have been hit with, at the very least, a shrug, but most likely an almighty eye-roll and a rant about why insurance companies suck.

But not this year, this year I am declaring myself a full-on fangirl for home insurance challenger Lemonade.

To paraphrase our esteemed leader Adam Morgan in Eating The Big Fish - in any category there are two leaders: the market leader and the thought leader – the one with all the ideas that you can’t ignore.

While the snappily named insure-tech category has seen plenty of start-up launches and investment in recent years, Lemonade stands out as the thought leader to keep your eyes on.

Photo: Lemonade.

Why? Well, firstly there’s the revolutionary pricing structure – Lemonade takes a flat percentage of premiums, pays out on claims and any remaining money is donated to social causes the insurer cares about.

Secondly, using AI instead of brokers to process claims speeds up efficiency and lets them make the headline grabbing ‘world's fastest payout of 3 seconds’ claim. Transparent pricing, conscious capitalism AND AI-fuelled efficiency? That's a 2018 zeitgeist triple whammy right there.

“Lemonade trusts its customers not to make dishonest claims, and customers trust Lemonade to pay out.”

And thirdly, and the reason why I've got my fingers crossed that Lemonade will make it over to the UK so I can sign up, is the biggest marketing buzzword out there – trust. Lemonade trusts its customers not to make dishonest claims, and customers trust Lemonade to pay out.

Because of the way the pricing model works, the business is not incentivised to reject claims and at the same time customers are discouraged to inflate theirs, as fraudulent claims only deplete the pool of money for good causes.

87% of Lemonade’s customers are new to the category; first time buyers or renters, and for those without entrenched loyalties to the status quo, this way of doing things could become the new normal for a whole generation.

The two year old business currently covers 8 states, but with plans to launch in 40 more, and with Softbank leading an investment of $120m in December 2017 to fund that growth, we expect to see rapid expansion of Lemonade over the next year.

And with the market leaders in insurance already trying to copy this thought leader, I predict that this challenger will continue to be the one to watch.