“We do everything,” Bixby said. “That enables us to handle the whole customer experience just like Allstate (ALL) or State Farm or Chubb (CB). We can do it completely differently because we built our systems entirely from scratch.”
Really? While it makes Lemonade feel bigger to compare itself to large established players, Lemonade has demonstrated that they are on a par with best in class insurance companies when it comes to customer service, and that includes renters claims. It may not be that easy for homeowners, especially when you don’t have the scale and therefore have to rely on TPAs.
In conclusion, insurance is a promise to pay a given amount in the future. As the Founder of Esurance I just know so well that there is demand for low cost, easy to buy simple auto insurance. Lemonade shows that there is also demand for low cost, easy to buy simple renters insurance. But the amount of money it had required to show that is just mind boggling (close to $1B). Anything else is just speculation.
Implications for Independent Agents
Some insuretechs are turning to distributing their products through Independent Agents. Hippo and other smaller insurance start-ups realize the value of independent agents and find the agency channel a low cost (relative to direct marketing) way to generate new business. Lemonade is less likely to pursue independent agent relationships given its predominant focus on renter insurance, and its strategy of focusing on the Millennial and Generation Z markets. Furthermore, the absence of a HO-5 product combined with the lack of an AM Best Rating make Lemonade a less than appealing market to independent agents, particularly those targeting affluent small business owners. Lemonade says that it had refused to get an AM Best rating. Or is it simply that its financials are so bad that Lemonade would not get an A rating?
A word of caution for insurance agents: this is not a very positive analysis of Lemonade. Simply because the company has very little to show for given the massive amount of money raised. Being complacent is the worst to do. Insurance agents are very way behind in technology in general. There plenty of reasons for that: lack of skills, complexity, cost, and an overall extremely fragmented industry. In subsequent articles we will discuss what an independent agent can do (I would say MUST DO) to leverage technology and grow.
There is a lot of money flowing into insurance related ventures, assuming there is some tech, and that the description includes “disruption”. Do not confuse Lemonade with Lemonaid, an online health provider that just raised $33M (!).
