Insurance that Disrupts – Lemonade

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Lemonade is an insurance company that charges about 4 times less than your average insurance. How the hell does it work? To start with, Lemonade provides insurance for renters and homeowners, and from September 21 is a fully licensed insurance firm in New York. It is a peer to peer insurance firm (P2P), where money is collected from the policyholders, and then in the case of need, is paid out from the pool. Such system allows eliminating some of the fees present in traditional insurance firms, making it cheaper for customers.

Traditional big and evil insurance firms make much money by keeping the unclaimed insurance to themselves. According to Lemonade, such actions provoke users to engage in fraudulent actions in order to get more from their policy. The startup came up with an idea to create a trustworthy environment and allow people to donate unclaimed money to a charity of their own choice. The founders say they first wanted to return money back to clients, but regulations were not on their side. What a nice guy Lemonade is, you might say. But how do they make money? They are making money by taking fixed 20 percent from monthly policy payments, and they promise they are not planning on raising the bar. Now, insurance rates for renters start at $5 a month, and insurance rates for homeowners start at $35. This is about 4 times less of what traditional companies charge. 

One and probably the most important thing that I did not mention is that Lemonade is an application. The beauty of it is that users can get insured and settle claims on the spot using their mobile devices. The founders aimed to cut bureaucracy, help people to save time and costs. Processes that used to take weeks now can be done within minutes. 

The company seemed to attract a lot of attention not only of potential users but also of big credible corporations. One of the main seed investors is Sequoia Capital. The venture capital firm that invested $13m in Lemonade also has predicted the growth of giants like Apple, Google, Oracle, Paypal, YouTube, and others. Lemonade also cooperates and is backed by reinsurers including Berkshire Hathaway and Lloyd’s. Hopefully, Lemonade will manage to gain some speed and be able to properly disrupt the insurance industry in the United States.