‘The Actual Industry Has a Problem’: Lemonade Isn’t Marketing Insurance Fluff
The speedy startup is guaranteeing money back with few (or no) questions. Just ask the bot.
The insurance startup Lemonade is not like those other “insurtech companies.” Touting artificial intelligence—a bot named Maya—and zero deductibles, the company is legally a “B corp” and wants to be a tech outfit that sells insurance. It’s backed by large rounds of venture capital funding, employs a behavioral economist and contributes 10 percent of its annual revenue to more than two dozen charities. Young, progressive urban dwellers are the company’s target market, and the goal is to entice all first-time buyers who might be wary of traditional insurance systems. Quiddity talked with Yael Wissner-Levy, Lemonade’s head of communications and content, about breaking into the New York market, anti-“marketing fluff,” and why traditional insurance appears to be broken.
For young, urban single people or couples, what are the most important things about your renters insurance policy to know?
There are three important things to know. One: it's instant. It takes seconds to get a policy and a few minutes to get your claim paid. Being there for people when things go wrong is something we’re extremely proud of. Two: it's inexpensive. The majority of our policies are for renters. The majority of our renters are first time insurance buyers. That's pretty incredible. Why are we getting to these people who have never had insurance? Did they think it was too expensive, too bureaucratic, too frustrating?
We’re able to reach a market who wants to get insurance in a self-serve kind of way, just how they order a cab or order takeout. We want to be that app where you can get coverage, update your coverage, change addresses, file a claim, all from your phone, for not a lot of money. We were able to reduce these costs because we don't have the expenses of a lot of traditional insurance companies. No one is sweating at HQ because things are just going digitally. We’re able to start our policy at $5 a month, the price of a latte. It's as reassuringly similar to the other guys but different in its prices and ease of use.
The last is our social good element. Lemonade was created partly because this idea of insurance, of communities coming together to help each other out when things went wrong, which has kind of lost its way. Lemonade took the technology of the 21st century but married it with a business model that's built on a flat fee structure. Traditional insurance companies are always in this conflict of interest of: should we pay them [the insured], or should we not? That cycle is vicious. We as regular citizens have an incentive to abolish our claims. I know they're going to deduct a deductible. We’re not criminals; we’re just doing it because the system is so going to wrong us. Because we recognize you won't be filing claims all day every day, there will be some leftover claims in your premium. We ask you to choose a charity ranging from the ACLU to Meals on Wheels. This isn't marketing fluff. It's an inherent change in the insurance model that's designed for social good.
Why are we getting to these people who have never had insurance? Did they think it was too expensive, too bureaucratic, too frustrating?
How would you describe the long-term value of protecting yourself with renters insurance versus the short-term value?
Our chief behavioral officer Dan Ariely has written books on why people lie and why people are fraudulent. One of his main theses is it's a system that brings out the worst in us. A lot of Lemonade is built on his research and behavioral economics. Many times you'll want to get insurance after witnessing someone have some kind of tragedy; then, your brain will make a decision like, “oh, I need to get on that.” Very often it's hard for us to think in the long term. Realizing you're paying a premium now for something that may or may not get payoff later — a lot of it has to do with the science of our behavior.
How is your company working to dispel common myths about renter’s insurance?
We’re dealing with it head on. We are trying to speak in plain English. When we speak to consumers, we’re trying to say, “oh yeah that kind of insurance?” We’re powered by AI (artificial intelligence). We treat ourselves as a tech company. How are we doing? We have screenshots from our bank account when we just raised rounds. You have a great UX, UI experience. And once a year you get an email saying, “This is the impact you made for ACLU or Teach for America,” whatever it is. Renters insurance is not positioned in the way it could be. The actual industry had a problem.
Are there any U.S. markets you’re focusing on in terms of promoting renter’s insurance? Why?
We’re a full-stack insurance company. That means we take on the underwriting and the claims. Whereas there are a lot of “insurtech companies,” it's kind of like putting lipstick on a pig. Being a full-stack renters insurance company—and it's an unusual feat to take on—means we work with state regulators hand in glove to get licensed, and thus launch state-by-state. We're already available for more than 50% of the US population, and intend to launch nationwide by the end of the year.
Is there any emerging technology that’s helping your company better connect with consumers?
You open the app or lemonade.com. You chat with a bot named Maya. Maya asks you a couple questions. Once she has answers, she’s able to produce an insurance quote for your policy. Claims are also done through another bot. We run your claim through our own kinds of tests. If it needs to go to a human, it's paid and reviewed right on the spot. That kind of data we’re collecting is going to make our product improve. We’re learning each day how to improve them. We’re able to constantly iterate on our product.
Renters insurance is not positioned in the way it could be. The actual industry had a problem.
What specific features make your renters insurance easy to access? How about to renew?
We have something called zero deductible. We know deductibles can suck. Really anything that's less than the lowest deductible, the insurance company will often come back and say, “Sorry, we can’t do anything for you.” If your $200 bag was stolen, we will give you $200, no questions asked, and we won't be raising your premium. You get two claims per year with no rate hikes for following year. We also have a live policy. You just got married, or your grandma just gave you earrings. With a couple of taps you can add someone's name, move apartments or change your coverage.
How are you thinking about needs of pet owners in your renters insurance policy?
Excluding a couple of breeds, most dogs are covered in liability.
How are you thinking about needs of people who work from home or have frequent guests?
Renters insurance policy is good for people who are on the go. It covers you while you're around the world.
How has the state-by-state rollout worked for your business as a new company?
We've been growing much faster especially in New York. We chose NY as our first state to launch in since it's considered to be a tough regulatory environment. We exceeded our own expectations when in 2017, we launched in other states such as California, Texas, and Illinois, and we're now launched in 11 states (and licensed in 17 more).
How are you working to build trust with consumers?
We’re trying to show them that as much as we’re radically different, we are licensed. We emphasize that we do work with state regulation. We are reinsured by giants of the industry, household names. We’re backed by the biggest pockets. Google, Softbank, Sequoia are just some of our investors. We are on social media every day and show case studies every day. It's been a two-way street. We show them how transparent we are, and we show them when we have mistakes.
Writer & journalist based in NY.