The “Uber of Insurance” is here

BY LYNN BRACKPOOL GILES for lifehealthpro

Here are two words you don’t often hear in the same sentence: revolutionary and insurance.  

But that’s exactly what experts are calling a new peer-to-peer (P2P) insurance concept presented by startup Lemonade. Though the company has yet to open its doors, the adjective-laden praise has commenced. Bankrate musesthat Lemonade may become the “the Uber of insurance” and Sequoia Capital’s Haim Sadger says his firm’s investment in the company was a no-brainer because “we’re betting that Lemonade will transform the insurance landscape beyond recognition.” Heady words from a venture capital firm that helped launch one-time startups Apple, Google and LinkedIn.

Lemonade recently secured $13 million from Sequoia and others in seed funding, which may not seem like much in the mega-billion dollar insurance industry. However, here’s some perspective: Uber’s initial round of funding garnered just $200,000, and the top seed investment amount in 2014 was $10 million for an analytics business named Kensho. Now you can see why many are calling Lemonade the next big thing.

The Bankrate article points out that a P2P insurance model usually involves a small group of policyholders who pay premiums into a claims pool. If there’s money left in the pool at the end of the policy period, members get a refund. However, it’s a costly format to get going. While this approach is relatively new to the U.S., similar P2P models have started – and succeeded – in other countries, including Germany (friendsurance), the United Kingdom (Guevara) and China (TongJuBao).

While Lemonade’s founders, Daniel Schreiber and Shai Wininger, have not yet disseminated much information about how their company will operate, their branding already feels different from the rest of the industry. “The world’s first peer-to-peer insurance carrier. We’ve redesigned insurance from the ground up to make it honest, instant and delightful,” proclaims the headline (and currently, the only content) on their website.

Schreiber and Wininger both come from the technology sector and they are weaving that expertise into Lemonade’s personnel decisions. They say that they have hired “technologists, designers, actuaries and other insurance professionals” who are “titans” in the insurance industry. But Lemonade is also “able to attract an eclectic group of people that the insurance industry has trouble recruiting.”

In interviews, the founders say that the New York-based company will launch in a few months and that they are working with regulators to become a fully approved and licensed insurance carrier (not a broker). Unlike Uber, they aim to comply with laws instead of trying to force the hands of regulators and challenge insurance regulations.

Though Lemonade has been stingy in providing details about its exact business model and products, the founders have confirmed that they will target consumers directly with the P2P “self-serve” technology that is at the core of their strategy. This approach will “alter the current industry’s bureaucracy and structure in ways not available to the legacy insurance carriers,” Schreiber said in the release announcing the funding. The release also said that the startup’s service will involve “radical transparency” and that it promises to transform “both the economics and the experience of insurance.”

Just as Uber has created speed bumps and headaches for the taxi business, Lemonade may deliver the same to insurance professionals. At the very least, it should be on everyone’s watch list in 2016.