• Lemonade is leveraging technology to change the way insurance works.
• Lemonade’s digital substrate gives the company many advantages over traditional insurance companies.
• Although Lemonade has a great deal of potential, the company is a high risk investment.

Lemonade (LMND) is a pioneer of the rapidly growing insurtech industry. The company is leveraging technology to improve efficiencies and reduce bureaucracy in insurance. Lemonade, which is built upon an entirely digital substrate, is looking to upend the traditional insurance industry with the use of bots and machine learning.

Changing the Insurance Paradigm

Technology is having an increasingly large influence on the insurance industry. Lemonade is capitalizing on this trend and attempting to completely upending the traditional insurance business model. Although the traditional insurance industry has long been resistant to rapid technological change, this is likely to change.

The emergence of AI and increasingly powerful computer technologies has the potential to change the paradigm of insurance. Lemonade is one of the first insurance companies to successfully use AI and machine learning as a basis for their business model. This relatively new approach to insurance could dramatically change the landscape of insurance.

The digitization of insurance has the potential to completely change how insurance is done.

Source: emerji

A New Approach

Insurance companies essentially collect large amounts of data to quantify risk. Lemonade’s digital substrate allows the company to capture far more data than traditional broker-based companies. In fact, Lemonade estimates that it collects ~100-fold more data compared to traditional incumbents.

What’s more, Lemonade experiences a continual cycle of improvement as more data allows for their AI to improve. This translates into better marketing, fraud detection, and understanding of customer needs, which in turn attracts more customers. The company’s use of bots and machine learning is also vastly improving the customer experience.

By removing brokers and the bureaucratic elements of insurance, customers are able to save large amounts of time and avoid headaches. According to Lemonade, “the median time to buy a policy from lemonade is about 90 seconds” and “roughly a third of our claims are paid instantaneously.” The incredibly efficient nature of Lemonade’s technology allows for cost savings on both the company and customer’s sides.

Lemonade’s approach is clearly working as the company grew its Q2 revenue of $29.9 million by 116.7% Y/Y. The company also increased its customer base by 84% to 814,160 customers. Perhaps most promising is the fact that 70% of the company’s customers are under the age of 35. Lemonade’s ability to capture a younger customer base should pay dividends in the long-term.

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