The U.S. property/casualty insurance industry is about to be tested directly by the sharing economy. Two tech entrepreneurs have raised $13 million in initial funding to launch a peer-to-peer online property/casualty insurance company named Lemonade, which they promise will reinvent the insurance industry business model and make insurance a “delightful” experience for consumers. The founders claim that with their peer-to-peer (P2P) technology, they will alter the current industry’s bureaucracy and structure “in ways not available to the legacy insurance carriers.” Lemonade, headquartered in New York, is being founded by Daniel Schreiber and Shai Wininger, both of whom have track records in tech startups. Schreiber most recently was president of Powermat (portable wireless device charging). Wininger co-founded Fiverr.com, a site for freelance design and other creative professionals. New P/C insurer aims to turn a consumer lemon of an experience into ‘lemonade.’ While the founders suggest they are onto something revolutionary, they are not yet talking about exactly what their business model is, what their product will do, or who else is involved. In an interview with Insurance Journal in December 2015, Daniel Schreiber, CEO, would not talk specifics about the company or its products, but said Lemonade plans to launch in a few months and will target consumers, not businesses. He said the firm has hired technologists, designers, actuaries and other insurance professionals (whose names he said will be recognized within insurance circles) and has been able to attract an “eclectic” group of people that the insurance industry has trouble recruiting. He said they have been working with New York regulators and will be a fully-approved and licensed insurance carrier, not a broker. He said that unlike the car-sharing firm Uber, his firm will comply with laws and not go about challenging insurance regulations. Schreiber said what they want to do can’t be done by simply applying technology to the existing insurance carrier bureaucracy. Instead, Lemonade aims to “go back to the basics” and use technology to replace the centralized bureaucracy of insurers and employ transparency to alter the culture around paying claims that many consumers distrust. He referred to studies showing almost a quarter of policyholders think it is acceptable to improperly inflate claims. What’s in a Name? Schreiber said the name for the company came from his partner, Wininger, and captures the idea of turning what they believe consumers feel is a “lemon” of an experience into “lemonade.” “Most Americans view insurance as a necessary evil rather than a social good, and that’s something we’d like to change,” Schreiber said in the capital raising announcement. “We’re challenging the way insurance companies work, with a peer-to-peer business model fueled by self-serve technology,” said Wininger, president and CTO, in the announcement. “We’ve seen this kind of combination breathe new life into other industries, and we’re determined to do the same for insurance.” Schreiber said that the idea of Lemonade “harkens back to the origins” of insurance but he argues those original businesses have become big and bureaucratic while consumers have become disenchanted. He said “it’s not insurers’ fault” they have become so bloated but people coming from other industries with different perspectives see insurance as ripe for transformation. Schreiber pointed to other financial technology firms that have been “cherry picking” aspects of the lending industry, including the LendingClub.com in personal loans and sofi.com in student loan financing. “It [the insurance industry] appears to most outsiders as a daunting task. It’s a whole different language,” he said when asked why it has taken until now for anyone to target insurance in the way other financial services have been targeted. It’s also been slow to happen because it takes a lot of money to start an insurance carrier, he said, suggesting that was why raising the $13 million was so important. Schreiber described the level of funding they received from Sequoia as a “very big deal” in venture funding circles. Lemonade will not be the first P2P insurance venture. Germany has friendsurance (founded in 2010), the United Kingdom has Guevara, and China has TongJuBao. It’s not now known in what ways Lemonade will compare to other P2P insurance ventures, although some act as brokers, not carriers. Typically, P2P sites invite users to form small groups of policyholders who pay premiums into a pool to pay claims. If there is money left in the pool at the end of the policy period, the members get money back. Lemonade’s financial backers are equally excited, saying that they think they are onto something big, partnering with people they know and believe are well-suited to take on the big insurance industry. “It is very unusual for a company to receive $13 million in an initial round of funding,” said Haim Sadger, partner at Sequoia Capital, in the release. “But it is rarer still to find such accomplished founders tackling such a sizable industry with such a compelling solution. We’re betting Lemonade will transform the insurance landscape beyond recognition. It is one to watch.” “I’ve known Lemonade’s founders for years, and we’re thrilled to be part of their journey from the very start. I can think of no entrepreneurs better equipped to reinvent insurance,” said Michael Eisenberg, founding partner at Aleph. “Daniel and Shai are on a mission to deliver a wake-up call for the industry, and a refreshing experience to consumers worldwide.” Since 1972, Sequoia has partnered with the founders of what are now well-known large companies including Apple, Airbnb, Dropbox, Google, LinkedIn, Square and Trulia. Israeli venture capital firm Aleph has invested in WeWork, Seeking Alpha, Gigya and others.
The founders of a peer-to-peer online property/casualty insurance company named Lemonade have raised $13m of initial funding, with which they plan to "reinvent the insurance industry", and make a “delightful” experience for customers in the process. Some experts are claiming that Lemonade could be the 'Uber" of the insurance market. Founders Daniel Schreiber and Shai Wininger, who both have start-up backgrounds, claim that with their peer-to-peer (P2P) technology, they will alter the current industry’s bureaucracy and structure “in ways not available to the legacy insurance carriers.” Specifics of exactly how the company will run have not been revealed, but Schreiber has stated that the company has hired technologists, designers, actuaries and other insurance professionals (whose names he said will be recognised within insurance circles) and has been working with New York regulators and will be a fully-approved and licensed insurance carrier, not a broker. In an interview on CNBC today, Schreiber explained why P2P is so important to his company.