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Lemonade Insurance Launches in New York

Staff Writer | September 28, 2016

Lemonade, a peer-to-peer insurance company, announces it has been licensed as a full-stack insurance carrier by New York State. New York homeowners and renters can now get insured and settle claims instantly, anytime and from any device.

"Technology drives everything at Lemonade," says Shai Wininger, president and co-founder. "From signing up to submitting a claim, the entire experience is mobile, simple and remarkably fast. What used to take weeks or months now happens in minutes or seconds. It's what you get when you replace brokers and paperwork with bots and machine learning."

Beyond bureaucracy and time, Lemonade's technology cuts costs as well. Lemonade's homeowners’ policies start at $35 per month, and renter's at $5 per month.  In addition to digitizing the entire insurance process, Lemonade reduces costs through giving.  In a reversal of the traditional insurance model, Lemonade treats premiums as if they were still the property of the insured, returning unclaimed money during its annual Giveback. 

Giveback is a unique feature of Lemonade, where each year leftover money is donated to causes. Cause-selection creates virtual groups of like-minded people, or 'peers.'  Lemonade uses premiums from each grouping to pay the claims of those individuals, giving back leftover money to their common cause.

"It's not our money." said Daniel Schreiber, CEO and co-founder at Lemonade.  "We repeat that sentence like a mantra, and have it emblazoned on our office walls. We never want to be in conflict with our customers. We never want to make money by denying claims. And that means giving back underwriting profits."

Giveback funds nonprofits, but benefits everyone. Fraud consumes as much as 38 percent of all the money in the traditional insurance system, inflating premiums by $1,300 and making the claims process protracted and unpleasant. While the industry shrugs this off as a cost of doing business, behavioral scientists have mapped the underlying drivers, providing Lemonade with a blueprint for building a new kind of insurance carrier.  Giveback is a part of the solution.

"Knowing that every dollar denied to you in claims is a dollar more to your insurer, brings out the worst in us all," says Dan Ariely, chief behavioral officer, Lemonade. "So we architected Lemonade to avoid conflicts of interest. We take a flat 20 percent fee, and give unclaimed money to causes our policyholders care about. Since we don't pocket unclaimed money, we can be trusted to pay claims fast and hassle-free. As for our customers, knowing fraud harms a cause they believe in, rather than an insurance company they don't, brings out their better nature too.  Everyone wins."

For all that is unique about Lemonade, some things are reassuringly familiar.  Lemonade is rated 'A, Exceptional' by Demotech, regulated by the State of New York, and is reinsured by Lloyd's of London, Berkshire Hathaway (National Indemnity) and other leading companies.

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