July 3, 2020 by Greg Meckbach
Despite the pandemic-induced economic downturn, an insurtech that promises tenants quotes within minutes started trading this week on the New York Stock Exchange.
Shares of Lemonade Inc. rose sharply July 2, closing at US$69.41, more than double the price at which it started trading in its initial public offering (IPO).
New York City-based Lemonade uses an artificial intelligence chatbot, dubbed “Maya,” to help clients sign up for renters’ insurance. At the moment, Lemonade does not write coverage in Canada. It also offers homeowners insurance.
Founded in 2015, Lemonade has gained popularity through its use of artificial intelligence and chatbots, Whitby, Ont., brokerage Mitchell and Whale Insurance Brokers Ltd. notes. “Lemonade Insurance is loosely geared towards city dwellers and makes its plans most advantageous for people who fit a certain model.”
Lemonade announced June 25 its 11-million common shares would start trading at US$29 each.
The S&P 500 closed Thursday at 3,130, down from 3,386 on Feb. 19 but up from 2,237 on March 23, which was 12 days after the World Health Organization declared COVID-19 a pandemic. For its part, Canada’s S&P/TSX Composite Index stood at 15,594 Friday afternoon, down from 17,994 on Feb. 20 but up from 11,228 on March 23.
Lemonade, which trades under the ticker symbol LMND, says it aims to replace brokers and bureaucracy with bots and machine learning, “aiming for zero paperwork and instant everything.”
Lemonade placed 25th last year on KPMG’s “Fintech 100,” an annual worldwide ranking of companies that are taking advantage of technology and driving disruption in financial services including P&C insurance.
One of Lemonade’s goals is to pay simple property claims almost instantly. However, Lemonade says there will be cases in which it needs to fully review a loss before approving a claim.
One tech trend the Canadian P&C industry can expect this year is an improvement in customer engagement and experience, said Ralph Chapman, vice president of financial services for IBM Canada in an interview in late 2019.
“We are finding that in some instances, the turnaround time is going from days to minutes – getting quotes, getting approval, process it, and you’re done,” Chapman told Canadian Underwriter, commenting in general on industry tech trends and not on Lemonade in particular. “Your clients can ask questions, file a notice of loss, check on payments or claims status, get quotes – all of the things that would normally involve human interaction and taking a lot of time from start to finish.”
The disruptive nature of companies like Lemonade came up in 2017 at the Insurance Brokers Association of Ontario’s annual convention in Ottawa. During that year’s CEO panel, moderator Jim Harris noted Lemonade aims to settle claims in three seconds.
“The [client] fills out all the questions, he fills out the chatbot, he takes a picture of the police report, he answers all the questions and submits and his claim request goes up into the cloud. It runs against 18 fraud algorithms in real time and three seconds later it says “your claim is approved,’” said Harris, leading to a question for Jean-Francois Blais, then president of Intact Insurance.
Harris asked Blais whether he sees the Lemonade model as a future model for Intact.
“I think Intact is going in that direction for sure. It’s not for tomorrow. This is why we have a lab team that is going to create proofs of concepts and that’s what artificial intelligence is all about,” Blais told Ontario brokers during the IBAO CEO panel in 2017.
I’m not sure whether Lemonade is a tech company or insurance company but one thing I do know for certain after reviewing their financials is that they are definitely a non-profit organization. Buyer beware