Lemonade is a full-stack insurer that provides a range of insurance products that include renters, homeowners, life, car and pet insurance. The company operates completely digitally, using AI-powered chatbots to onboard clients and process claims. The company’s AI runs several anti-fraud algorithms to eliminate false claims and asserts to handle 30% of claims instantly. The company’s business model is similar to peer-to-peer insurance, where Lemonade donates any unclaimed premiums to charitable causes of the customer’s choosing. Lemonade offers life insurance through its website and mobile apps in partnership with digital life insurance provider, Bestow.
The company most recently launched its own car insurance product, “Lemonade Car” in November 2021, which uses its underlying AI-based technology to process policies and claims, enabling safe drivers to obtain better rates. Lemonade Car has been specifically designed to offer lower insurance rates for low-mileage drivers and environmentally-friendly electric vehicles (EVs) and hybrid cars. The offering will use a telematics app to measure factors such as mileage and driving habits, and will also provide services such as 24/7 on-location roadside assistance. In November 2021, the company also announced its plans to acquire Metromile, a pay-per-mile automobile insurance provider, marking Lemonade’s first acquisition. The acquisition is expected to be an all-stock transaction that reflects a fully diluted equity value of around USD 500 million (around USD 200 million net of cash). The transaction is expected to close during Q2 2022, subject to regulatory approval.
The company holds a pan-European license, which enables it to sell insurance in 31 countries across Europe, and operated in France, Germany and the Netherlands as of the same date.
As of September 2021, the company had around 1.4 million customers. For the full year FY2020, Gross Earned Premium (GEP) amounted to USD 158.7 million, more than doubling from USD 75.5 million in FY2019. Net Earned Premium (NEP) increased by 21.2% YoY, closing at USD 77.3 million. The net loss ratio for the full year improved by only 100 basis points to 71% in FY2020. The company claims that an increasing percentage of premiums and claims from new policies and geographies (especially in Q4) is a key reason for the relatively stable loss ratio over the year.
In July 2020, Lemonade sold 11 million shares in an Initial Public Offering (IPO), raising USD 319 million in the process at a valuation of USD 1.6 billion. Lemonade announced a secondary stock offering in January 2021, where the company offered 3 million shares for sale, with the option to purchase additional shares for underwriters to cover higher than expected demand. Lemonade also disclosed that certain existing shareholders would also be offering their own shares for sale, amounting to approximately 1.5 million shares.