Lemonade, Peer to Peer Insurance, and Giving Back

Lemonade raised $120 million this week. When I saw they are doing peer to peer insurance, it caught my attention because home owners / renters insurance are both antiquated products in need of modernization. I poked around their website, and found this:

How is Lemonade’s business different from that of a traditional insurance carrier?

Traditional insurance companies make money by keeping the money they don’t pay out in claims. This means whenever they pay your claim, they lose profit. This is why getting your claims paid fast and in full is sometimes so hard.

Lemonade was built differently. We take a fixed fee out of your monthly payments, pay reinsurance (and some unavoidable expenses) and use the rest for paying out claims. In essence, we treat premiums as if they were still your money and return unclaimed remainders in our annual ‘Giveback’. Giveback is a unique feature of Lemonade, where each year leftover money is donated to causes our policyholders care about. We treat policyholders who care about the same causes as virtual groups of ‘peers’. Lemonade uses the premiums collected from each peer group to pay for the group’s claims, giving back any leftover money to their common cause, and uses reinsurance to cover for cases where the group’s claims exceed what’s left in the pool. This way, our customers enjoy amazing insurance, and society gets a little push for the better. It also means that, unlike traditional insurance companies, we’re not in conflict with our customers, so we’re happy to pay claims fast and with no hassle.

I just checked their video, and certainly like what I see/hear…

Obviously you know that I love seeing giving back built into core business models (their giveback page is here).

This is certainly one startup I’m going to keep my eye on in 2018.

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