Lemonade from Lemons

We’re not alone in believing that the insurance industry is ripe for disruption – the market is enormous, exceeding 5% of US GDP, and the incumbents have archaic business processes that yield horrible customer satisfaction levels.

There is probably some correlation between how many filing cabinets an industry is responsible for filling and how significant an opportunity it might be for new digital-first entrants – the insurance industry manages to hoard paper inside but also sends plenty of it to us all.

Given this and the simple fact that insurance is important, offering piece of mind to almost all of us, plenty of startups have had ambitions to make a dent in the opportunity but most have struggled to find the achilles heels of the incumbents – not least because of the capital requirements to build a brand, underwriting infrastructure and the established channels.

We believe that’s finally changing with the emergence of the ‘full-stack’ disruptors, not least our existing investment in Oscar and our most recent investment addressing the US Home Insurance market – Lemonade.

There are plenty of reasons for us to be bullish about what Daniel, Shai and team are building at Lemonade:

  • Market Size and growth – homeowners insurance market was $90Bn in gross written premiums in 2015 and is increasing, penetration of renter’s insurance remains low
  • Team that is diverse with deep consumer and insurance experience, culture of openness as demonstrated by this post on initial metrics
  • Full stack approach – including being a regulated insurance company (rather than broker) with a separate agency for structuring partnerships – this gives greater flexibility and margin potential
  • Design of product and behavioural economic features thanks to the involvement of Dan Ariely
  • Data centric approach, enabling everything to be tracked – the company understands the option value in this knowledge
  • Social impact is at the heart of the model and is expected to improve the business fundamentals (it allows groups to market the product and receive profit-share, this in turn is expected to reduce the rate of fraudulent claims), this has been audited as part of the company’s certification of a B Corp

We’re exciting to be part of the journey…