Does Lemonade really hold a better hand of cards than incumbent insurers or other full-stack insurtechs?
The Price Card?
Probably only if it used data analytics to focus on simple cover from more profitable customers. Some evidence that as soon as the claims become more complex Lemonade has to adopt the same labour-intensive processes as traditional insurers. Straight-through Processing has some inbuilt flaws- especially in Home and Contents. 360Globalnet, which has processed over 2 million claims via its Digital Claims Platform, experiences 35% or more walk-aways by home claimants on a self-service claims journey. AI and STP would just have paid out.
Looks like Lemonade's price card could be less than attractive.
The Trust Card?
Incumbent insurers rank low on trust especially the disgraceful way they treat existing customers over new ones i.e. charge them more and offer no loyalty. But as Lemonade grows it seems that business compromise and growth ambitions may eat away on the trust card. Avi Ben-Hutta gives examples galore.
Jury out on the Trust Card.
The Data Card?
Lemonade claims "Being built from scratch on a digital substrate means we collect about 100X more data than a traditional carrier".
That is disingenuous! Incumbent insurers collect the data it's just that they cannot access and analyse it. You might say that adds up to the same thing but that is not correct.
Insurers could access, join and analyse this mix of unstructured, semi-structured and structured data. It is just that they typically do not.
Digitally inspired insurers can change this omission.
“Insurers need to build their strategy on globally scalable platforms where data analysis becomes a decisive competitive factor. Both are still in their infancy”
Oliver Bate Allianz CEO
"At the end of the day, Lemonade doesn’t have the right cards to win the insurance marathon, but that doesn’t mean they aren’t intimidating (and attracting) others by sprinting. So, focus on the right cards and don’t forget – insurance is not broken, just bent."
OCT 22, 2018
It also brought a bunch of copycats and it’s making several insurers get out of their way – Aviva is just one example. Last week, Northwestern Mutual announced the funding of four grants totaling $600k to support childhood cancer research – did you hear about it? I’m sure most of you didn’t. Lemonade didn’t invent social causes, trust, or data – they’re just very vocal about them. At the end of the day, Lemonade doesn’t have the right cards to win the insurance marathon, but that doesn’t mean they aren’t intimidating (and attracting) others by sprinting. So, focus on the right cards and don’t forget – insurance is not broken, just bent.