Lemonade

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 life insurance provider Banner Life (a subsidiary of Legal & General).

The company 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. As of January 2024, Lemonade Car was available in seven states : Arizona, Illinois, Ohio, Oregon, Tennessee, Texas, and Washington.

Lemonade utilizes a machine learning model–6th generation Lifetime Value (LTV6)–to predict a customer's likelihood to churn, claim, and cross sell, from which it derives an estimated lifetime value of a customer. It is also used to score each product, market and campaign. In addition, by incorporating customer acquisition cost into the model, it helps the company decide which product, market, and campaign receives the incremental dollar spend.

In July 2022, Lemonade completed the acquisition of Metromile, a pay-per-mile automobile insurance provider, in an all-share transaction valued at USD 145 million or 7.3 million Lemonade shares, excluding cash, worth USD 150 million, which marked Lemonade’s first acquisition. Through the acquisition, Lemonade aimed to bolster its auto insurance offerings by using Metromile’s vast amount of driving data to offer competitive and precise policies and benefit from Metromile’s written premiums of over USD 110 million and insurance licenses in 49 states, compared to the three it owns in Ohio, Illinois, and Tennessee, accelerating its speed to the market throughout the US.

The company holds a pan-European license, which enables it to sell insurance in 31 countries across Europe with established operations in France, Germany, and the Netherlands. In addition, it obtained a UK carrier license from the Prudential Regulation Authority (PRA) in June 2023 , allowing the company to introduce a broader range of insurance offerings as well as strengthen its presence in the country. It initially launched in the UK in October 2022 , offering renters (contents) insurance.

Key customers and partnerships

As of December 2023, Lemonade had ~2.0 million customers.

Lemonade partnered with Mitchell International , to use the latter’s claims management platform to streamline and automate the claims processes of its auto insurance business–Lemonade Car. In addition, the company entered into a strategic partnership with Aviva to enter the UK market offering renters insurance, with the latter also being its reinsurance partner. It also collaborated with BNP Paribas Cardif (the personal lines insurance arm of BNP Paribas) to offer digital renters and homeowners insurance in France. Furthermore, the company partnered with Chewy to offer pet insurance policies as part of the latter’s suite of insurance and wellness offerings CarePlus. 

In June 2023, the company partnered with General Catalyst (GC), a venture firm and an early investor in Lemonade, to create Synthetic Agents. This program, which commenced on July 1, 2023, involved General Catalyst (through its Customer Value platform) financing up to 80% of all Lemonade's customer acquisition costs. In return, they received a commission of up to 16% of the stream of premiums they helped finance. Once GC had recovered its investment and capped the return on any one cohort, the remaining 'lifetime value' of the customers from that cohort accrued entirely and indefinitely to Lemonade.

Funding and financials

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.

For the full year of 2023, Lemonade recorded total revenue of USD 429.8 million (up 67% YoY), due to gross earned premium increasing 37% YoY to USD 672.3 million. Its net loss improved to USD 236.9 million in 2023 from USD 297.8 million in 2022, while its net loss ratio also improved to 89% from 97%.