By replacing brokers and bureaucracy with bots and machine learning, Lemonade aims for zero paperwork and instant everything.

 What’s all the fizz about Lemonade?

It raised eyebrows with boasts of settling a claim in a ‘world record’ three seconds.

It’s the new kid on the block, the disruptor and the insurer that doesn’t do paperwork.

With its bold and innovative moves is Lemonade on to something likely to strike fear into the heart of the big guys in the industry?

Or is the start-up simply going to make legacy insurers sour with a business model that could go pop at any time?

Who’s Lemonade?

U.S based Lemonade launched their insurance product for renters and homeowners in September 2016, on a mission to make processes faster and more transparent through the use of artificial intelligence and behavioural science.

The insurer raised a $13 million seed round without an app to demo or a Powerpoint presentation – just two founders “and an idea”.

They currently only sell insurance to customers in New York and Illinois but its founders aim to have the product available to 97% of the US population this year.

How does Lemonade operate?

Lemonade’s a fully-approved and licensed insurance carrier, it doesn’t use brokers and it never will, according to CEO Daniel Schreiber.

Algorithms coupled with a clean and simple design make it extremely quick and easy to sign up and claims are approved in minutes rather than days.

Automation is the key and this helps keep costs to a minimum.

That’s where Maya comes in.

Customers on the Lemonade app or website are greeted by the charming chatbot who calculates premiums starting at $5 a month for renters and $35 a month for homeowners.

The company screens applicants quickly as software pulls data and cross-references details about homes or neighbourhoods from multiple sources.

This means fewer questions for customers.


of a customer's premium is kept as flat fee


of the premium is set aside for reinsurance


left in the pot pays claims and whatever’s left forms part of “Giveback”

What makes Lemonade different?

In a blog post the company highlights the ‘Urban Dictionary’ definition of insurance as “a business that involves selling people promises to pay later that are never fulfilled.”

Whether some insurers fit this definition is irrelevant.

“How consumers perceive insurance matters. When people think the game is fixed, they embellish claims to ‘level the playing field’”, says CEO Daniel Schreiber.

“This gives insurance companies more grounds for denying claims — sending insurance into a tit-for-tat spiral.”

Lemonade wanted to start from scratch, pointing out “the problem is the system” and emphasising a need to go back to basics.

Hiring designers, technologists, actuaries and others from the insurance world they used technology to replace bureaucracy and created transparency around paying claims.

Lemonade’s algorithms help them reach a decision: should a claim be handled automatically or not. The algorithms will either pay claims instantly or call in the help of a human to take over.

Lemonade’s business model is straightforward:

  • 20% of a customer’s premium is kept as a flat fee by the company
  • 40% of the premium is set aside for reinsurance from firms such as Lloyd’s of London, to protect against big claims not covered by premiums
  • The 40% left in the pot pays claims and whatever’s left at the end of the year goes to a charity of the customer’s choice as part of “Giveback”.

What’s “Giveback”?

Giveback is Lemonade’s USP where leftover money is donated to causes policyholders care about.

Instead of turning unclaimed premiums to profits, Lemonade give them away to the customer’s chosen charity or good cause.

Lemonade says that unlike traditional insurance companies they’re not in conflict with their customers, so are happy to pay claims fast and hassle free.


Luke Robbins, broker manager

If successful, Lemonade’s model has the potential to change the way we do insurance.  Because of this, we’re taking them very seriously.

We’re spending time looking deeply into how Lemonade and other similar insuretech companies have the potential to disrupt the insurance industry, so we can develop market leading insight into what the future of our industry might look like.

We believe this market leading insight will ensure we remain well placed to ensure our customers and partners get exactly what they need from their insurance provider for years to come.

Pete Emery, director of retail brands at RSA says: “As a new insurer, the jury’s out on how successful they will be. There seem to be as many articulate reasons stating why they can’t succeed as those that think they can. Whatever becomes of Lemonade as we currently know them, we would be foolish not to learn from some remarkable challenges they have brought to market.

These include:

Story-telling: Their back story and ongoing narrative has been exceptional. They have built trust and excitement in a dull and untrusting environment. To succeed we will need to break out from our coffee house language and engagement with our customers.

Ease to buy: They’ve taken a grudge purchase and almost made it fun. They’ve certainly made it more relevant and appealing to the younger generation. We need to take our 300 years of knowledge and experience and turn it into adaptation and adoption.

Artificial Intelligence: a peerless use of AI to drive fast decisions utilising all the cynical processes of fraud checks, value checks, underwriting checks but behind the curtain and lightning fast. We need to remove layers of bureaucracy and manual process and embed AI.

Lemonade’s a great example of a business being greater than the sum of its parts.

It’s the parts we need to invest in to optimise our own strengths, scale, brand and reputation.