If you’ve never been in love with an insurance company, Lemonade is looking to change that. 

The startup property insurer wants to shake up the industry, pitching love, charitable contributions and customer service. Whether that’s enough for the New York-based company to steal customers from State Farm, Berkshire Hathaway or Liberty Mutual remains to be seen.

Three-year-old Lemonade believes it’ll find success by taking head-on the public’s complaints about the industry. The company employs friendly chatbots “Maya” and “Jim,” powered by artificial intelligence, over commission-driven brokers. To avoid the appearance of greed, Lemonade charges a flat fee and donates money after claims are paid out to charities including Unicef, Feeding America and the ACLU. Claims processing also often takes seconds, they say. 

“Lemonade was founded on the idea that the current state of the insurance industry is frustrating, outdated, and brings out the worst in people,” the company said.

Lemonade may say it wants to be the “most loveable” insurance company, but it faces a hard sell. Insurance is tricky to market, forcing consumers to consider death, injuries, accidents — stuff they’d prefer not to discuss. Maybe this is why geckos do the talking.

Customer loyalty isn’t deep, according to Nick Lamparelli, chief evangelist at the website Insurance Nerds. 

“You don’t get anything when you buy it, so it’s hard to have a pleasing interaction,” Lamparelli told Karma. “Because of that, people are looking for the lowest price.” 

Expanding to 50 States

Lemonade offers renters and homeowners policies with coverage prices starting as low as $5 and $25 a month, respectively, according to its website. The company is planning to expand to all 50 states and Europe and is considering other types of coverage. Lemonade declined to provide specifics to Karma and said it isn’t profitable yet.

The approach may be paying off, at least a little. New entrants in the insurance market such as Lemonade are gaining traction at the expense of incumbent carriers, particularly among younger millennial consumers, according to Bain. Lemonade outperforms other property/casualty carriers in reducing hassles, simplifying processes and saving time, according to survey data released by the management consulting firm in 2018.

“The company has quickly built up customer loyalty by being at once personalized in its approach and simple to use,” Bain said. “However, our survey shows that many insurance upstarts are underperforming compared with incumbents and failing to attract sufficient customer interest.”

Lemonade reportedly is valued at $2 billion in the private investment market where it has raised $480 million in six financing rounds, according to Crunchbase. At the end of last year, Lemonade had more than 300,0000 customers, $57 million in sales and 180 employees. The insurer donated $162,135 to charity.  

Other companies in the insurtech sector haven’t attracted nearly as much funding as Lemonade. Rival Trov, which competes with Lemonade in the renter’s market, has gotten less than $100 million in funding. Policygenius, which provides consumers information about different types of coverage, has gotten $51 million in funding, Crunchbase says.

Lemonade says it collects 100 times more customer data than rivals, enabling the company to underwrite policies more precisely and save customers money.  Though it remains a small player in the property casualty market, its influence on the industry already is apparent.

“A lot of insurance companies look at them and say we need to have something like that,” said Lamparelli, adding that rivals are “copy-catting” Lemonade, which the company has called out its rivals for doing.

Take Liberty Mutual’s digital Lulo platform for rental insurance, which has a logo that’s similar to Lemonade’s. Farmer’s launched a new claims processing site. Geico took it a step further through its commercial showing rapper/actor Ice-T at a lemonade stand that debuted when Lemonade launched. Geico then used lemonade, the drink, to target the same millennials and introduced Lemonade-like chatbots.

Vulnerable to Fraud?

Lemonade also faces many of the same profitability challenges of its larger rivals, Lamperelli said.

 “At the end of the day, they are just a digital insurance company,” he said.

Lamparelli said he is concerned that Lemonade’s emphasis on speed makes it vulnerable to fraud. Lemonade has “made it too easy to file a claim,” he said. 

Illegitimate claims are a real problem for the industry. Insurance fraud costs the average family $1,300 each year, and 24%  of people think it’s OK to pad a claim, according to statistics cited by Lemonade. The company denies that it has a problem with fraudulent claims, citing a measurement commonly used to evaluate an insurance company’s financial strength.

“Our loss ratio is improving incredibly as time goes by: our underwriting and data are getting more precise as we get larger in terms of users and smarter in terms of algorithms,” spokeswoman Yael Wissner-Levy said in an emailed response.


“Insurance used to be about a community coming together in times of need, and that sort of insurance lost its way,” said Lemonade, which contends that its business model gives customers less reason to cheat.