According to Lemonade, business was brisk for the first full year they offered all five of their insurance options to customers.
On Thursday (Feb. 23), the full-stack, AI-driven insurance company reported earnings for the fourth quarter of 2022, telling investors that policyholders are purchasing more coverage and paying higher premiums on average.
With the share price of this next-generation digital insurance provider up double digits for the year, compared to the S&P 500’s dismal returns which have failed to even track inflation, the company has outperformed the market so far this year and has surpassed consensus revenue estimates each of the past four quarters.
After reporting strong quarterly results for the fourth quarter, the company’s stock has soared today (Feb. 23), rising by about 13%.
What is the insurance company’s special sauce? On the call, Lemonade CEO and co-founder Daniel Schreiber assured investors that the company was “built for AI from day one.”
Asked by an investor what he thinks the “third wave of AI exploding into common knowledge and the marketplace” will mean, Schreiber responded, “There’s no doubt these technologies are becoming incredibly powerful.”
Using AI and highly automated processes, Lemonade has developed products that can do a lot of the work that insurance companies have traditionally done by hand.
Lemonade’s signup process and claims management are both handled by the company’s proprietary AI chatbot, AI Jim, which makes use of natural language processing (NLP) to parse large amounts of data.
The type of deep insights we’ve built our business upon is difficult to glean if you haven’t architected your company so that AI has access to deep information, according to Schreiber. Separate, non-intertwined data sets will be challenging for [third wave] AI to mine efficiently, as will human interfaces of all kinds.
He went on to say that Lemonade “will be able to leverage these AI abilities in the market as they mature in a way that will be unmatched by competition” because it was built on a technical foundation of AI and behavioral economics designed to replace brokers and bureaucracy with bots and machine learning solutions that aim for zero paperwork and instant everything.
The Absence of Any Required Human Interaction
The more customers Lemonade brings on board, the more training data for the company’s proprietary AI systems receives from its user audience.
Fast expansion and new young clientele, as reported by company execs on the earnings call.
The total number of customers increased by 27% YoY, reaching 1,807,548. This is nearly double the number of customers that were served in 2020.
So, the company said that its underwriting and risk management policies would keep getting better and more profitable. Executives have pointed out that the company’s business mix is shifting toward products with higher average policy values and that the average premium per customer has increased by 30%.
Schreiber claimed, “There are claims that AI Jim can handle start to finish, fortysomething percent where there is no need for human intervention at all,” and that “98% of claims begin with a conversation with AI Jim, the first port of call for customers will be talking with this AI through the app.”
When customers use Lemonade’s AI Jim chatbot to submit and manage claims for renters’, homeowners’, auto, pet, and life insurance products, it activates a specialized AI module that is trained to use contextual data to analyze risks, damage, repair costs, and other information relevant to the submitted claim.
PYMNTS’s “Insurance Provider Rankings” have Lemonade at #8 with a score of 70 out of 100, placing it among the best insurance companies in the world.
As reported on February 14, the digital-first insurance company has teamed up with BNP Paribas Cardif to offer digital renters’ insurance in France.
According to reports, 34% of European insurance companies are interested in improving their digital payment capabilities, and insurance companies and InsurTechs all over the world are investigating how to use digital solutions to improve nearly all aspects of the insurance process.