Why Lemonade Failed To Disrupt Insurance

Founded in 2015 Lemonade set out to disrupt the insurance industry with its advanced AI algorithms and unique business model. But 9 years later the company is still losing money. In this video we'll take a deep dive into Lemonade and why disrupting the insurance industry has proved so difficult.



#Wallstreetmillennial #ai #artificialintelligence #insurance

0:00 - 1:23 Intro
1:24 - 4:19 Insurance Industry
4:20 - 14:02 Lemonade
14:03 Financial Performance

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Creative Commons — Attribution-ShareAlike 3.0 Unported — CC BY-SA 3.0
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[kevinbarry]

Dunning Krueger effect; and you know it's a stupid idea when Softbank throws money at it

[thorin]

I laughed my head off at the claim of having a “data advantage” over insurance companies. Insurance companies live and die on the strength of their data analysis and they have spent over century building those tools. You take a population of 10, 000 people and an insurance company can tell you with a ridiculous degree of accuracy how many will die each year and the causes. The odds are Lemonade’s ‘AIs’ were trained using data and models made publicly available by the insurance companies.

[TimN-]

As a reinsurance underwriter who has underwritten lemonade, and several other insurtechs as we call them, this summary is mostly correct. Great job

[andrejmichal]

As someone working in the reinsurance industry, I must say you did a great job in explaining how some of the reinsurance products work, with enough detail and not too much complexity. I can also confirm that reinsurers are one of the most technologically focused companies.

[jacrispymcrib]

Interviewed at Lemonade out of college. Their hiring process iirc consisted of 5 or 6 interviews and multiple take-home assignments. I found a different job after interview #2

[NorthStarBlue]

Whenever a company claims their business model is "disruptive", what they really mean is it's unsustainable but they're hoping they can pull in money quickly enough that no one will notice.

[pfeilspitze]

3:22 Actually, tornados have less of an effect than you might expect. They're the perfect case for insurance: they do a ton of damage, but to a small fraction of a region, and thus risk-pooling the region is incredibly effective and useful. It's a great example of where even for people for whom self-insuring damage to their car isn't worth it, for example, it's still worth getting tornado insurance.

Now, houses in the regular path of hurricanes, on the other hand, insurance is silly. Because everyone gets hit by the hurricane at the same time, and averaging things out over just a few years between hurricane hits isn't nearly enough. Premiums for hurricane coverage thus have to be incredibly high.

[Helladamnleet]

Yeah, who would have guessed insurance companies with their over 100 years of experience would know how insurance works.

[tomlxyz]

The point with charity is bullocks. Even if they can't take additional money as profit they have an incentive to keep the money pool big so they don't run out of money on future claims. The times you pay without getting anything back are used to fund other's insurance claims. That's just how insurance works

[RAS_Squints]

Almost can say Lemonade turned out to be a lemon

[asdfsadf]

another instance of tech bros trying to rediscover the wheel

[jazzarito]

I'm on my 2nd lemonade renters policy now and the company is great. They are an easy company to deal with. From the customer side, the experience is great. $5 a month for a policy that will cover up to $10k in losses at a whim is an easy buy for me.

[grahamjones]

Many people dont care who the insurer is as long as they can afford the bare minimum coverage as required by landlords for tenants or state governments for car drivers.

[spoddie]

I'm in IT. I went for an interview with one of the biggest insurance companies and I was very impressed with their data science.

[pranksterboss]

Does softbank invest in any idea that isn't crap?

[jeremylawrenceamadehilledw]

For what it is worth, I work in insurance defense for a Tier 1 carrier in CA and we also handle cases for Lemonade. Lemonade's insureds in CA get Tier 1 litigation counsel. If you can get Tier 1 litigation counsel for less than if you bought a Tier 1 policy, that is a good reason to insure with Lemonade, regardless of the company's profitability.

[spezial-m]

Why Lemonade Failed To Disrupt Insurance? Because it's a beverage. Next question, please.

[Carteruss]

Attempted to cancel my renter’s insurance, lemonade proceeded to cancel all of my policies (personal items, auto, etc).

A human would’ve been greatly appreciated

[gbfraser]

What a fabulous introduction to Lemonade and the possible over-selling of AI capabilities by techies trying to get higher valuation for not so special companies! Great job! I would love to see a similar deep-dive on some of the leading SAAS companies.

[LamLawIndy]

I do think that the insurance industry may be ripe for disruption in some respects, but relying on policyholders to refrain from "embellishing" claims b/c of the "charity donation" isn't a good strategy.