Among the companies forwarding digital transformation is Lemonade. Insurance might not be the first place you think of when digital transformation or disruptive innovation come to mind. Insurance is just insurance, right? Also, this is a crowed market full of established brands. How can this Lemonade thing go anywhere?
Lemonade is setting itself up as the insurance of the future thanks to its emphasis on AI and chat bots. Yes, I was just as skeptical as you are when I first read about it as well. Chat bots never seem to get the job done for me. My experience with chat bots is about as pleasant as my experience with driving in Boston: Slow, frustrating, full of cursing, and I never seem to be able to find what I’m looking for. Personal tangent aside, if Lemonade’s AI is viable then it should make the whole process of insurance a significantly smaller headache than it is for most people.
This appears to be the case for Lemonade. They say that the best things in life come to those who wait. They never said however that getting approved for insurance coverage is one of the best things in life. According to their website, their algorithms allow you sign up in as little as 90 seconds (!). It cannot be overstated how big this is. Long gone are the days of waiting days and weeks to hear if you’ve be approved. I dream of the day that this innovation takes hold in other companies and industries (I’m looking at you, Eversource). It’s been said that mine is a generation who has grown up with instant gratification. While there are plenty of negatives to this, the flipside is that this expectation spurs further innovation. Quicker turnaround times started becoming the norm as processing capacity and speed amped up across the digital landscape. And now, it’s come to the realm of insurance.
Too good to be true, right? Well, despite being such a new player in the industry, they already boast the highest level of customer satisfaction amongst renters (https://www.dig-in.com/list/amica-lemonade-rank-highest-in-home-rental-insurance). So not only does the AI-based sign up work, the support chat bots appear to be doing their job as well. This is to me is the bigger surprise. Like I said earlier, support chat bots never seem to be able to help me with what I need. Clearly these other companies are treating their bots as an afterthought while lemonade makes them a core competency. Or more likely I’m just bad at asking questions.
As you may have inferred from Lemonade’s strong reputation in the rental market, their customers tend to skew younger. An AI-centric insurance company is bound to attract a young crowd as they are (generally speaking) more likely to be open to the idea. It is for this reason that Lemonade has a lot of long-term potential. With a young and loyal customer base, they should continue to grow and perhaps even replace the top dogs in the field.
Speaking of dogs, Lemonade has also positioned itself as a big name in pet insurance (forgive the complete and utter boomer humor). A good number of people became pet owners during the pandemic and Lemonade honed in on this. Just last month, they announced that they would be adding preventative care to their pet insurance coverage (https://www.pymnts.com/insurance/2021/lemonade-debuts-preventative-care-coverage-for-puppies-and-kittens/). Preventative care is apparently not commonly covered, setting Lemonade apart from the rest of the crowd. This is warms by heart as an animal lover, but what it really speaks to is the situational awareness of the company. Not only are they digitally savvy, they are cognizant of the fact that there are still segments of the market that can really be dominated.
Another point of differentiation for Lemonade is their charitable giving program. Customers are able to choose nonprofits and donate to them via money left over from paying off claims. Call me a cynic but I don’t think is just pure altruism. Like every other company, Lemonade is at least in part doing this for its own image.
There is another question about Lemonade’s ethical commitment and it’s centered on the automation. As we’ve discussed a few times already this semester, one must take into consideration the socio-economic implications of AI. But I don’t think that Lemonade is guilty of any wrongdoing here. It’s not as if they have a large staff of customer service workers that they suddenly replacing. They were formed in 2016 and their identity as a company hasn’t changed. If State Farm suddenly shifted towards AI then I think those concerns would then be warranted. Lemonade isn’t going to gain a monopoly over the entire industry and displace all the customer service employees. A more likely scenario would be that Lemonade’s model is so successful that other companies begin to follow suit. Innovation and its downstream effects are unavoidable, but if they are gradual then the drawbacks can be somewhat mitigated.
Overall Lemonade is a promising company. They aren’t yet profitable but that is likely to change. Their AI should continue to improve as potential customers continue to warm up to the concept. On top of that, they will soon be offering car insurance and thus really begin to take off. The real question is that with all of this said, why am I still screwing around with MetLife?