Peer-to-Peer Insurer Lemonade Opens in N.Y.
Lemonade, a peer-topeer insurance startup that launched in January, has been licensed to sell homeowners and renters insurance through its website and mobile app in New York.
Lemonade takes a 20% flat fee at sign-up, and at the same time, insureds select a charity to which they want excess premium donated. Peer groups are created through cause selection, and claims are paid out of that group to its members. Whatever money is left over at the end of the year is donated to the cause.
Lemonade believes its model will flip the incentive structure in the insurance industry and reduce fraud.
“Since we don’t pocket unclaimed money, we can be trusted to pay claims fast and hassle-free. As for our customers, knowing fraud harms a cause they believe in, rather than an insurance company they don’t, brings out their better nature,” says professor Dan Ariely, the company’s chief behavioral officer.
In Lemonade’s fully digital application process, prospects are asked a series of questions before being offered up a rate. The company says its use of “bots and machine learning” helps it pass savings on to the customer while reducing the use of paper.