Disrupting Insurance with Instant

Everything, Killer Prices and a Big Heart

Group - 2
Kishan Nathani (280) | Shweta Nayak (301) | Ayushi Agarwal (323)
 CONTENTS
1. INDUSTRY OVERVIEW
❏ Traditional Insurance Industry
❏ History & US Market of Insurance

2. THE DISRUPTION- LEMONADE

❏ Concept of Lemonade
❏ Brief Journey of Lemonade
❏ Founders of Lemonade
❏ Lemonade Flywheel Paradigm

3. LEMONADE- BUSINESS MODEL

❏ Customer On-boarding Process
❏ Business Details
❏ AI Infrastructure
❏ USP of Lemonade
❏ Growth Strategy
❏ Competitors

4. WAY AHEAD FOR LEMONADE

❏ Expansion into the New Market
❏ Lemonade at Present
INDUSTRY
OVERVIEW 01
 Traditional Insurance Industry

◂ Insurance is a contract, represented by a policy, in which a policyholder receives financial protection or

reimbursement against losses from an insurance company.

◂ Insurance policies are used to hedge against the risk of financial losses, both big and small, that may result from
damage to the insured or their property, or from liability for damage or injury caused to a third party.

◂ Insurance companies base their business models around assuming and diversifying risk. The essential insurance
model involves pooling risk from individual payers and redistributing it across a larger portfolio.

◂ Most insurance companies generate revenue in two ways:

1. Charging premiums in exchange for insurance coverage
2. Reinvesting these premiums into other interest-generating assets
 Reinsurance

◂ Insurance companies engage in reinsurance to reduce risk. Reinsurance is insurance that these companies buy
to protect themselves from excessive losses due to high exposure. Reinsurance is an integral component of
insurance companies' efforts to keep themselves solvent and to avoid default due to payouts, and regulators
mandate it for companies of a certain size and type.
 Traditional Insurance Industry
◂ Channels of insurance Distribution:
1. Lead Generation Providers: Transfer of Data to Insurance Providers, not much authority or risk
2. Agencies & Brokers: Represented Insurance Companies, Sell Directly to Customers or other Agents/Brokers
3. Managing General Agency(MGA): Higher Authority than Brokers, can Perform Certain other Functions like
Settling Claims, Issue Underwriting, etc
4. Carriers: Building and Marketing the actual Products, Main Decision Making on Policies and Risks Involved
 Traditional Insurance Industry

◂ Types of insurance:

1. Property & Casualty (P&C): Home, Auto, Commercial Insurance to business

2. Life & Health (L&H): Life Insurance, Retirement Funds
3. Health Insurance: Other than L&H covering medical and healthcare expenses

◂ Shortcomings:

1. Customer On-boarding Time: Paper work, Manual Assessment, Delayed Response, Low Scale
2. Claims Settling Time: Manual Verification, Human Capital Extensive, Low Accuracy
3. Financial Risk: Manual Prediction, Asset Heavy, Lower Risk Assessment Success
4. Saturated Product Mix: Increase in players with no unique offerings
5. Customer Perception: Delayed Process, Distrust, Poor Settling Ratio
6. Total Cost: Capital and labour Intensive, High Customer Acquisition Cost
7. Customer Segment: Ones with credit history only, no catering to Poor or segments like Students, Farmers, etc.
 History & US Market of Insurance
Today the US insurance market is the world’s largest – accounting for some 27% of total global insurance
premiums. It is also one of the most sophisticated with a number of exclusive and customized offerings along
with complex & costly medical system.

What led to that growth? Classic Insurance was Fire Insurance- Prevalent in US & Europe since 1700s.

Over the years, the insurance industry has met the challenge of protecting assets in an increasingly complex
world – proving resilient in the face of the terrorist attack of September 11, 2001, Hurricane Katrina in 2005 and
the 2007–08 financial crisis.

Year 2017 Year 2021

◂ Net Premiums: $1.8 trillion
◂ Product Distribution: 31% P&C, 33% L&H, 36%
Health
◂ Top Players(Overall): Chubb Ltd., AIG, MetLife
◂ Top Players(P&C): State Farm, Geico (Berkshire
Hathaway Inc.), Liberty Mutual
◂ Net Premiums: $1.35 trillion
◂ Product Distribution: 53% P&C, 47% Others
◂ Top Players(Overall): MetLife, Equitable Holdings,
Prudential Financial Inc.
◂ Top Players(P&C): State Farm, Geico (Berkshire
Hathaway Inc.), Progressive Corp.
THE DISRUPTION
- LEMONADE 02
 Concept of Lemonade
Lemonade ? Lemonade CEO explains how its business model differs from traditional insurance (yahoo.com) (5:40)

Concept of Lemonade

◂ Year 2014: Insurance Industry yet to be disrupted

◂ With?- Usage of technology, removal of mistrust

◂ Founders- no experience with insurance industry, so starting from the scratch- making it more customer centric

◂ Company incorporated by August 2015

◂ Contacted the insurance division of a big four accounting firm to hold a ten-day session to teach them about the
industry and guide the early decisions

◂ Consultants advised to establish Lemonade as an MGA, still the founders choose to go as a carrier
 Concept of Lemonade
◂ To establish as a carrier, needed a policy management system or a underwriting model, rating engine crucial
components costs 1.5 to 13 million dollars. Decided to make it in-house, created a customized rating engine
within 4 months and named it “Blender”

◂ In general their early decisions were not in-line with traditional insurance practices with ignorance of advice of
consultants

◂ Main idea- to make people believe that Lemonade is on their side & decrease or nullify the hatred people have
had for insurance firms

◂ In a typical two party game, insurance providers tend to increase the rejection of claims and make the process
difficult, customers on the other hand often exaggerate and inflate their claims

◂ To remove this mistrust, lemonade tried to establish a three-part arrangement - with the inclusion of charities
 Brief journey of Lemonade
The Meeting Customer Generation Lift-off
Shai Wininger and Daniel Schreiber Following it’s official launch, Lemonade
meet for the first time through a mutual Lemonade takes off with announces a further
friend. They discuss the possibility of unprecedented success, signing up $300m investment
starting a business in insurance more than 14,000 customers within from SoftBank
industry without any prior its first six months of operation. In taking its
experience.They hired industry veteran the same period, Series A and B investment capital
Ty Saglow to help them.. funding rounds generate a further total to $480m.
$48m in investments. Hold-on for further
details.

2014 2015 2016 2017 2019-20

Founded in Tel Aviv Kerching

With a mission to disrupt Money continues to roll in as
insurance market by investors fall over themselves
using AI and behavioral to provide capital to the
economics. Raised $13m growing insurtech. Allianze
through investors in its and Sound Ventures join up, as
first funding round in well as SoftBank - raising the
December 2015. investment total to $180m.
 Founders & key members

Daniel Schreiber Shai Wininger Proff. Dan Ariely

(Chief Executive Officer) (Chief Operations Officer) (Chief Behavioural Officer)

Ty Sagalow Maya Proser Moshe Liberman

(Chief Insurance Officer) (VP Business development) (Backend Architect)
 Lemonade - FLYWHEEL PARADIGM

Delighting
Growth generates
Customers for
data
rapid growth

Smarter and Data allows

better platform system to learn

A Data driven Approach

Lemonade aims to collect as much customer data as possible to improve its AI applications and make underwriting and pricing more
accurate in ways that competitors can’t. It describes how collecting and studying data are helping to improve its loss ratio ( ratio of
loss to premiums), as very high loss ratio isn’t sustainable for an insurance company, while a very low one is profitable but not good
for customers
03 Lemonade -
Business Model
 Business Model
Target Market Pricing
HENRY - High Earners, Not Rich Yet
Monthly Subscription based Model
Young tech-savvy renters who prefer to
As opposed to the annual payments made
sign up and manage claims through an app
in traditional insurance companies

Reasons to choose this segment Entered the market with aggressive pricing
i.e., half of average annual premium
● Least attractive market segment for charged by other insurers
incumbents
● Lesser premiums which were Lemonade retained flat rate of 25% of
determined by customer’s risk of premiums to cover its expenses
claims and acquisition costs
Out of remaining 75% of premium,
❏ 15% was used to purchase reinsurance
50-80%
Giveback, ❏ Upto 60% was used to settle claims
Brand ❏ Any remaining amount after this were
cheaper identity
Digital donated to charities via Giveback
experience mechanism
 Lemonade AI Infrastructure

AI JIM AI MAYA
30% 3.7MN CX.ai 25%
Claims were handled Suspicious activity detection Built in-house customer care platform Requests are handled

● Controlling the claims inflows ● Responsible for insurance purchases and

● Assigning the incoming claims to human customer support issues
claims experience(CLX) team, based on
● Customized and instant answers for the complex
availability and complexity of claims
● Fraud detection of the claims filed through the questions
video of the customer describing the incident ● Changing the policy

Goal is to provide 90% of the claims and 90% of the customer requests handled by these two bots by constantly training and optimizing them
Customer Onboarding Process
● Once a user started the process, Lemonade's
algorithms gave a risk score. The risk assessment
typically evolved as the user navigated the platform.
● If a person was approved, the quote offered
represented the default option for property
coverage the algorithm calculated as a best fit, but the
user could increase or decrease coverage with the level
of interactions.
● As Lemonade’s predictive algorithms improved, they
were better able to present the most appropriate
default option. In the beginning, the most common
default offered was $10,000 in coverage and was later
increased to $20,000.
● Not pricing the risk adequately could result in
underinsurance. For example, if a customer owned
$100,000 in property, a policy covering only $10,000 had
a much higher propensity to be claimed in full. If a
customer owned $10,000 in property, his entire
dwelling had to be destroyed to claim the entire
$10,000 policy coverage.
● After purchasing a policy, the user was prompted to
choose a preferred cause/charity for Giveback from the
list of charities that signed up to receive donations
from Lemonade’s customers.
How Lemonade stood out in the CROWD?

“When I look at insurance I look at an industry that

has an antagonistic, annoying, difficult process with
low trust and high dishonesty.”
- Proff. Dan Ariely
 Trust
Thus Lemonade built its business around
The traditional insurance ecosystem is flawed as
gaining trust of it customers. It started the
declining claims helps the insurance company to
“Giveaway” program suggesting there is no
earn, resulting in conflict of interest.
incentive for rejecting a claim.

Through these, Lemonade details fascinating

They also started a blog called “ Transparency metrics and performance data – information
Chronicles” that other companies would protect at all costs.

Providing this information cements Lemonade’s

honest and open ethos, strengthening its appeal
with consumers who want to buy from ethical
companies.
 Good Heart
Only a fixed percentage of premium was retained
Lemonade removed the financial incentive bias
by Lemonade. The rest amount would be used for
by introducing the “Giveback” program.
reinsurance and claim settlement.

If there is any leftover money at the end it would Lemonade is one of the only insurance
go to the charity of the customer’s choice.“It has companies which do not invest the premium in
nothing to gain by denying or delaying claims” heavily polluting companies.

While the Fortune Top 100 were giving out 0.1% of

Lemonade is world’s 1st public benefit insurance
their revenue in CSR, Lemonade was giving out
company~ certified B corp.
far more than the industry standard approx 1.2%.
 Incredible Prices
❏ Subscription based model rather than
1 time investment as done by
traditional insurance companies
❏ Retained only 25% of the premium
compared to the industry average of
30%.
❏ They also provided bundled
discounts.
❏ Use of AI & ML helped to reduce the
labour intensive operations, thus the
overall operating cost.
Marketing
❏ Reinvent how to market insurance evident
from from their slogan “Forget Everything
you know about Insurance.”
❏ Lemonade positioned its renters insurance
as meant to “Protect the Things You Love
for the Price of a Latte.”
❏ Lemonade also collaborated with vendors
that interacted with consumer at the
“golden moment”.
 Instant Everything & Easy
❏ Getting a new policy or applying for a claim is
done directly through the mobile application,
reducing human intervention. Lemonade claims
that getting insured just takes 90 secs and 3 mins
to get paid back!
❏ Gathered information from third party sparing
customer from answering repeated questions, thus
reducing the overall processing time.

❏ Rather than filling in forms, customers simply

record a video testimonial on their phone via the
app.

❏ Use of technology like AI/ML and RPA to automate

policy underwriting and claim settlement process

Lemonade App in action

 CUSTOMER ACQUISITION & DISTRIBUTION
❏ Distribute their product through agents.
❏ Lately incumbents in India have started
their online websites and application, but
their lead generation process remains
highly offline.
Incumbents
❏ Highly labour Intensive due to
dependence on offline channels for
distribution.
❏ Direct-to-consumer, acquiring
customers via online distribution
channels.
❏ Lemonade’s paid marketing was digital
through channels like Google &
Facebook which later expanded to
Youtube & Instagram.
❏ While this method initially increased
customer acquisition costs, this type of
distribution has enormous benefits in
the form of the oil of the 21st century:
data.
❏ Using chatbot and AI & ML Lemonade
is able to cut costs by needing to
employ far less human
employees/agents
 UNDERWRITING
❏ Underwriting (i.e. determining the risk,
cost, and terms and conditions of the
policy) is usually performed according
to standard actuarial models.
In traditional insurance companies,
Incumbents
❏
departments are siloed off from each
other and rarely (if ever) communicate
with each other.
❏ Insurance underwriters are
professionals that are in charge of
assessing risk and establishing a stable
and fair market for the business.
For instance, a health insurance
underwriter would make assessments
of information with regard to the health
background of an individual such as
family history, age, and current illnesses
if any.
❏ By using artificial intelligence (AI) and
machine learning Lemonade continually
improves their underwriting, gets better
at detecting fraud (by analyzing videos
sent in by claimants), and streamlines
their internal workflow and customer
interaction.
❏ Lemonade’s use of AI and automation
extends to their internal processes
through their digital internal workflow
manager, AI Cooper which allows for a
level of data integration among
departments.
 CLAIM MANAGEMENT
❏ Claim settlement process is highly
manual, including submission of
documents and is prone to frauds.
Ex. Most of the health insurance claim
settlement processes require you to
Incumbents
submit hard copies of receipts and
prescriptions in India. As per 2019,
62% of health insurance settlement
takes 6-30 days.
❏ Lemonade uses a fully digital claims
process and collects 100x more data
points than traditional insurance
companies through the app.
Ex. when you make a claim, you take a
video on your phone and explain what
happened. Lemonade knows your
location, the date/time, how long you
took to fill out each part, whether you
changed your answers, your tone of
voice, facial expressions, any
hesitation, and so many other small,
but revealing data points.
 Growth Strategy
❏ But they were at a disadvantage - incumbents had years of data on millions of policies to help them assess
and price risks.
❏ Thus Phase one of growth was to sell many policies and Phase two was to settle claims!
❏ This helped them to collect more data to find correlation between policies to claims and the outcome of that
has to be improvements in algorithms.
❏ Given the strategy, Lemonade did not expect profits in the first few years of launch. The loss ratio (ratio of
incurred claims to premiums earned) of Lemonade is fairly high due to this reason.

❏ In 2017, Lemonade made $10.1 million in

sales.
❏ In 2018 Lemonade became the best choice for
1st time renters.
❏ The app had a 4.9 rating on google play store
based on 11,000 reviews. (current rating 5/5)
❏ Lemonade earned a Net promoter Score of
~70 while the industry standard was around
16-64
❏ Lemonade is world’s 1st public benefit
insurance company
 Competitors
❏ Majority of insurtech startups in the P&C space acted as agents or MGAs, Lemonade was the only
homeowners insurtech carrier.
❏ Lemonade believed that more digital experience would help educate the market and customers comfortable
with purchasing insurance online.
❏ Entry barrier is less as technology is rapidly improvising, and insurance industry is not any different.

Renters’ Insurance Home Insurance Incumbents

Jetty, a renters insurance Hippo, a homeowners The biggest challenge with

startup, had a large
property developer as an
investor, who facilitated
access to potential
customers during an
insurance “golden
moment.”
insurance startup that
raised nearly $110 million,
also used public sources to
aggregate data on
potential customers to
offer a better user
experience
big established Insurance
firms is its data of millions
of customers. Lemonade’s
business depended on data
but they were on data
collection phase and thus
there underwritings of risk
was not upto the mark
 WAY AHEAD

04 FOR
LEMONADE
 Lemonade in 2018

$180 million
raised in
Covered venture
Expanded
$50 billion capital till
to 24 U.S
Launched renters, in insured date
states
condo and value
homeowners
insurance Sales were
products in New Insured $57.2
York 425,000 million up
customers from $10.1
million
 Potential Options For Lemonade

OFFERING NEW RELATED SERVICES WITHIN US INTERNATIONAL EXPANSION

❏ Extending the services in 20+ states of US where ❏ With the use of AI technology and its bots, Lemonade can
Lemonade is not yet operational expand globally without needing employees on ground
like other incumbents
❏ Improving renters and homeowners’ products by adding
related elements such as identity theft and extra ❏ Regulations in Europe allowed obtaining a single pan-
coverage for valuables like jewelry European license in one country and passporting it to
other countries with little authorization
❏ Automating 90% of the claim and customer care services
Based on Lemonade’s criteria i.e., Size, insurance market
❏ Figuring out the sales strategy for different types of profitability, customer receptivity to innovation, regulatory and
customers - one are new home buyers and others who business environment, and adoption of new technologies, 5
are switching from another company markets were highlighted - Germany, UK, Netherlands, France and
Spain
❏ Bundling up the insurances for example home and auto
bundle or pet insurance Netherlands Germany
- Consumers bought insurances from
- Diligent regulator large trustworthy companies
- Market receptive to innovation - Young, first time renters tended to
Makes Deepen the purchase TPL insurance from same
disruption - Multilingual
Lemonade Built-in for
carrier as their parents
stickier profit incumbents
Increase in
margin Target UK
through audience
upsell - Complexity to obtain license
(Brexit situation)
- Price sensitive customers
 Challenges to Enter European Market
01
Sensitivity to data privacy
with passing of General Data
Privacy Regulation(GDPR)
legislation
04
Complexity to get license in
European countries (Brexit
in UK)
02
Europe’s fragmented
consumer culture would
require product to make
adjustments for each country
05
Risk of misfiring if same
philosophy used in European
countries as many people
appreciate insurance in
Europe
03
Marketing message that proved
successful in US might not work
in Europe for example Giveback
component
06
Multilingual Target market
and price sensitive audience
 Buzz of Insurtech and Lemonade
Every week we come across newer Insurtech Organizations and they are simply raining in the developed and
developing countries.

But where Lemonade has got the advantage?

1. MultiTrillion-dollar Industry: R&D Team, Revolutioning Products, Market Penetration

2. Data: Now, Lemonade has been for a while. Organic Data Collection and ML Predictive Analysis

3. Customer Centric: Policies helped, Better Scaling of Customer Base

4. Being a Carrier: Complete Control, Better trust

Lemonade’s strategy has carried it far, from the raise of nearly $500 million in venture capital financing in multiple
rounds to a 2020 IPO that pulled in $308 million, and beyond.

Lemonade CEO latest interview: https://www.youtube.com/watch?v=lMD9pNMcKxs

 Lemonade at Present
Erez, Senior Vice President, R&D joined Lemonade in February 2019, helping to build operations as the company
generated significant growth, through its launch in the public markets, and its debut of pet, life and car insurance
in the US to complement its renters’ and homeowners’ insurance products already in play.

Over that period, Lemonade has also expanded into Germany, France and the Netherlands, which has given Erez
and his team ample opportunities to guide technology growth.

Lemonade, which has been “cloud-native” since its launch, relies on a number of programming types and
languages to support its platform and services.

R&D team focusing majorly on the existing product improvement with robust services and looking out for other
possible new offerings in emerging markets.

In continuation to loss making situation, Lemonade saw a big jump in losses for 2021 due to catastrophes
including Winter Storm Uri and California’s wildfires, though it has generated growing premium, and its customer
base reached 1.4 million by the end of 2021.

Recent Short Ads: https://www.youtube.com/watch?v=-DKPLaWetB8,

https://www.youtube.com/watch?v=XXA6sSzfE0Y, https://www.youtube.com/watch?v=ILDcR08vyp8,
THANK
YOU