Peer-to-peer insurer Lemonade has finally opened for business; the startup announced yesterday that it was a fully licensed carrier in New York, with plans to expand its business to the rest of the country.
Lemonade’s insurance policies for renters and homeowners start at $5 and $35 monthly, respectively—a fraction of what customers would typically pay with traditional insurers. The company only takes a flat 20% fee of all the money paid into policies.
The insurer leverages technology in order to enhance customer experience. Policyholders only have to use the company’s proprietary app to take out a policy or make a claim. The app features automated representatives called Chatbots that can help users with all their insurance needs. Lemonade believes that its use of technology can simplify and streamline the claims process.
“Technology drives everything at Lemonade,” Lemonade president and cofounder Shai Wininger told VentureBeat
. 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. It’s what you get when you replace brokers and paperwork with bots and machine learning.”
Although Lemonade’s highly competitive pricing and utilization of technology are industry disruptors on their own, it is the company’s peer-to-peer approach to insurance that sets it apart from the others. Lemonade’s payout system requires policyholders to designate a nonprofit that can receive payouts from their unclaimed insurance. Any cash left over from the policy each year is donated to a cause.
Originally, the company wanted to payout these underwriting profits back to policyholders, but could not under current law; Lemonade is looking to amend the law.
“Our initial application to the department was to give the money back to consumers. They were not going to do it as the laws are currently drafted,” Lemonade CEO and cofounder Daniel Schreiber told TechCrunch
. “Spiritually our idea is that it’s not our money it’s your money… that’s something that the law is not drafted to support.”
Lemonade believes that its policyholders are less likely to make fraudulent claims if they know that their money will be paid out to a charity they have selected.
“You’re not screwing some big amorphous nameless company,” commented Schreiber. “You’re screwing your local charity.”
Lemonade is backed by reinsurers such as Lloyd’s of London and Warren Buffett’s insurance carriers under Berkshire Hathaway.
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