Thesis - Lemonade is a new type of insurance company. Founded in 2015, the founders looked for an industry that could be rebuilt for the 21st century with better technology and new distribution. They decided the insurance industry was ripe for disruption, with many of the companies being hundreds of years old and not particularly well-loved. Unlike legacy insurers, which mostly operate through brokers and resellers, Lemonade is a direct-to-consumer brand. They market themselves to younger, first-time purchasers of insurance who are generally under-35. Whilst these customers are generally lower value, they believe by building a relationship with them early they can benefit from a lifetime of repeat insurance purchases. In just a few years, Lemonade has become one of the more popular insurance brands in the markets it operates in. Interestingly, Lemonade is a registered B-corp. As well as shareholders, they consider employees, the environment and society as key stakeholders. To build trust with their policy holders, they run a giveback program - whereby any excess premiums they have over a certain threshold are donated to charities of customers choosing. They believe this builds better behaviour for both them and the customers. They started with renters insurance and have expanded into home owners and more recently pet insurance, showing lateral growth in their addressable market.
Product - With no physical locations and no network of brokers, the product is delivered in a digital first way, through a mobile app and website. In order to calculate a premium and process a claim, Lemonade has two separate chatbots. Lemonade is able to collect data from the customer first hand, a problem legacy insurers have often struggled with when acquiring customers through brokers. With more data on each customer, Lemonade is able to train models that better calculate the risk and price of each premium.
Leadership - Both co-founders have strong entrepreneurial backgrounds. Founder and CEO Daniel Schreiber was previously a senior VP and president at both Sandisk and Powermat. Daniel has a 99% approval rating on Glassdoor.com and 97% of employees recommend working at the company - strong signals of the Lemonade culture. The other co-founder, Shai Wininger, previously co-founded Fiverr, which went public in 2019.
Financials & Performance - In their last quarterly report, Lemonade announced total collected premiums of $188.9m, up 99% year on year. They have 940,000 customers, growing 67% year on year, which highlights their aggressive growth strategy. Premium per customer was $201, up 19%. The loss ratio was 72%, meaning they pay out ¢72 on each dollar. This has declined from 87% the previous year. They company is not yet profitable and does not plan to be for the foreseeable future, as management plans to continue investing in new product lines and geographical markets. With a market cap of $6b in a trillion dollar insurance industry, there should be room to grow.