Capitalists And Money

Socially conscious insurer Lemonade makes entry into UK market with AI-driven model

New York insuretech company Lemonade Inc today launched in the UK market with a view to disrupting Britain’s centuries-old insurance sector with its socially-conscious, AI-driven business model.

The digital insurer aims to break the “cycle of distrust that plagues the insurance industry” with its pledge to cap its margins at 25 per cent by donating any extra income to charity, Lemonade co-chief executive Daniel Schreiber told media.

In capping its own profit margins, the firm aims to rebuild trust in the insurance sector by limiting the incentive it has to deny its policyholders’ claims.

In turn, by paying any excess profits to charities, Lemonade hopes to tackle the “huge problem” of insurance fraud, by discouraging people from embellishing their own insurance claims.

“You might feel differently about embellishing your claim if you’re reminded that you’re not sticking it to the man – the nameless, faceless behemoth with whom you have a conflicted relationship – but rather to the soup kitchen that you volunteer at on weekends,” Schreiber said.

The firm’s tech-driven model, which sees it use chatbots to resolve claims quickly, has seen Lemonade win records for paying out on policies. “Just shy of half of our claims are settled within three seconds,” Schreiber said.

Lemonade, which now has a market capitalization of more than $2bn (£1.8bn), was established by Schreiber and his co-founder Shai Winniger in 2015, based on the ideas of Nobel prize winning professor Dan Ariely’s about the nature of cheating and dishonesty.

“If AI is one pillar, behavioral economics is another pillar,” Schreiber said.

Ariely’s research showed people are for the most part happy to cheat and act dishonestly, until they start feeling bad about it, as it showed moral reminders have the power to discourage cheating and dishonest behaviour.

“One of [Ariely’s] conclusions was that if you set out to make a system that brings out the worst in humans, it would look a lot like an insurance company,” Schreiber said, as he explained Lemonade’s “socially impactful” model aims to solve the insurance sector’s “business problem”.

Lemonade’s entry into the UK market follows its signing of a long-term deal with centuries-old insurance giant Aviva. From today, UK residents will be able to purchase contents insurance policies via Lemonade’s app or online from as little as £4.

“Insurance as we know it hails from the UK, as do I. So both professionally and personally bringing Lemonade to the UK is a homecoming of sorts,” UK born tech entrepreneur Schreiber said.

Adam Winslow, chief executive of Aviva’s UK & Ireland general insurance business, said that by joining forces with Lemonade, the 325-year-old insurance company hopes to “reach a broader range of customers, including renters, an under-served yet growing segment of the UK insurance market.”

Lemonade’s entry into the UK market comes after the New York firm entered Germany in 2019, the Netherlands in 2020, and France earlier this year.