How Technology Is Disrupting Home Insurance: Lemonade Inc. CEO Daniel Schreiber | CNBC
Lemonade founder Daniel Schreiber on disrupting the insurance industry
- Insurance provider Lemonade is a three-year-old startup that recently received 0 million in a funding round led by Japanese telecom giant Softbank.
- Lemonade is attempting to reinvent the homeowners and renters insurance model in the US by cutting out brokers, offering competitive rates, and using an AI-powered mobile app.
- Co-founder Daniel Schreiber sat down with Business Insider to chat about the key characteristic needed to break into a multi-billion dollar marketplace.
In the spring of 2015, Daniel Schreiber and Shai Wininger sat down in a cramped coworking space with a whiteboard and an unusual goal: to reinvent the homeowner and rental insurance industry, entirely from scratch.
The catch? Neither Schreiber nor Wininger knew anything about insurance.
Instead of reaching out to insurance experts to gain a better understanding of the industry, the co-founders resisted what Schreiber describes as a "temptation" to access insider knowledge and opted for an alternate route: "We milked our ignorance for all its worth," said Schreiber.
Last week, Schreiber sat down for an interview with Business Insider in the freshly minted SoHo headquarters of the project he set out to create just three years ago. The result of Schreiber and Wininger's thought experiment is a company called Lemonade, a blossoming insurance provider that's everything the established insurance industry isn't.
For one, the startup's central product, a cheery white-and fuchsia-hued mobile app, is surprisingly straightforward. Users receive bespoke rates for renter and homeowner's insurance in an exchange with Lemonade's spunky chatbot, Maya. The entire process takes under two minutes.
And it's not just straightforward, it's affordable. When I take the app for a spin, I'm surprised by my quoted rate. For a home-rental insurance policy that covers everything from fires to vandalism to water damages, Lemonade quotes a rate of less than a month. It's less than the from Liberty Mutual and nearly half of the that Geico quotes me.
Lemonade Lemonade won't pester you with reminders to sign up, either — a congenial courtesy that might have escaped my notice, had it not been for the multitude of emails and voicemails left me by both Geico and Liberty Mutual. (Notably, the cheerless customer service representative at Liberty Mutual had about half the personality of Lemonade's chatbot.)
Aside from its competitive rates, everything about Lemonade's approach to insurance is distinctly counter-intuitive from what many people envision when they hear the word "insurance." There's nothing staid or stuffy about it, and the company is refreshingly upfront about their business model, which is presented in an upbeat cartoon that's available on YouTube.
The branding, the app, and the product are all intended for people like me: urban dwelling millennials who would prefer to handle their finances through personable, easy-to-use apps.
Despite the obvious challenges ahead, Schreiber says undercutting the behemoth insurance industry presented an intriguing proposition to both Wininger and himself.
"We were looking at a few different things, but once we encountered insurance, we stopped. It had three things that never come together," he said. "How often do you discover a huge industry that nobody's touched in a hundred years that everybody hates? It's too good to pass up."
According to Schreiber, there's plenty of problems with the way the insurance industry currently makes money.
"Insurance companies make money by disappointing their consumers," said Schreiber. "It's difficult to think of another sector where that's true. But if they delighted all of their consumers, they'd go out of business, because the way insurance providers make money is by denying your claim."
Schreiber describes this model as an innate conflict of interest, in which customers and providers quibble endlessly over the same coin, imbuing the relationship with enmity even before a claim is filed.
Instead, Schreiber and Wininger decided to implement a model in which they receive a flat 20% of the quoted rates for their services.
Lemonade has co-opted a clever approach to discouraging the filing of fraudulent claims as well. When users sign up for a policy, they're asked to select a charity of their choice. A percentage of any money leftover from unfiled claims will go towards the charity, which Lemonade hopes will deter any dishonest filings. The company estimates that 10% of its yearly revenue is awarded to its charitable giving program.
With 75% of its users under the age of 35, Lemonade's attractive position as an insurance company that appeals to the country's up-and-coming city dwellers has attracted big name investors as well. In its most recent funding round, the company scored 0 million in a round led by Japanese telecom mogul Softbank. Schreiber says the funding will go into expanding both the company's platform and geographic reach, and hints at plans for other types of insurance that are in the works.
Schreiber credits Lemonade's early success in the industry to the ignorance which allowed both Wininger and himself to re-envision an insurance company for the modern age. "We were able to think about stuff at a foundational, fundamental level," Schreiber said.
Video: Founder Spotlight: Lemonade's Daniel Schreiber | Disrupt NY 2017
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