Lemonade CEO says traditional carriers have 'lost supremacy'

Lemonade’s CEO Daniel Schreiber said InsurTech is “better at the art and science of underwriting risk” than traditional carriers, speaking in an interview with The Insurance Insider after the company revealed it landed $300mn in financing.

In his exclusive interview with this publication on Thursday, Schreiber spelled out a vision for insurance in an era when internet companies have access to far more data than traditional carriers.

 “Insurers have lost supremacy,” Schreiber said, with technology companies such as Google able to tap vast amounts of information about consumers that could be used to underwrite risk.

“There are structural challenges that the industry faces that’ll make it very hard for the companies that dominated in the previous 100 years to succeed in the future,” the Lemonade co-founder said.

He added that InsurTechs that can harness the power of data and use AI and machine learning to analyse those data sets will enjoy a “powerful structural advantage” over incumbents.

“We are better at the fundamental business of underwriting risk,” he said.

Schreiber said the carrier still had $180mn in the bank from previous funding rounds, including Series C funding led by Softbank.

“We’ve spent less than half of the money we raised in previous rounds,” Schreiber said.

“This [most recent fund-raise] isn’t because we suddenly ran out of money. It is because us and the investors have the opportunity to create a new kind of insurance company.”

The scale of the latest funding round puts Lemonade firmly in unicorn territory – the term for a technology business valued at more than $1bn. But the ambitions of the New York-headquartered insurer do not stop there.

Pointing to the scale of the global insurance industry that stretches into the hundreds of billions, Schreiber said: “We could become a $20bn company and have a market share of 1 percent.”

He said the company wanted to build a “loved, trusted and trustworthy brand on a global basis”.

The carrier has applied to become a licensed insurer in the European Union, although it would not confirm in which jurisdiction.

Schreiber revealed that Amsterdam will host Lemonade’s European hub.

The start-up’s digital infrastructure means is relatively easy for the carrier to enter new markets once regulatory approval has been received.

“California, Texas are our largest markets, where we have zero employees.”

Quizzed about the way the insurer had kept certain expenses off its combined ratio calculation, he said the financial disclosures made by the company had been structured to conform with New York insurance regulation.

The sustainability of the InsurTech’s financials has been questioned in a series of blog posts by IoT Insurance Oservatory founder Matteo Carbone and Scor P&C Partners deputy CEO Adrian Jones.

But Lemonade’s combined ratio has radically improved over the past year, reducing by 319 percentage points to 116.8 percent in Q4 2018, compared to the same time the year before.