Lemonade Is Disrupting the Insurance Industry With Social Good—Here's How
Who actually trusts their insurance company? For many people, insurance is a necessary evil. Traditional insurers have an interest in maximizing profits, which creates an incentive to deny claims.
Daniel Schreiber and Shai Wininger, co-founders of Lemonade, wanted to fix this problem.
"One of the factors that stood out most to us when building a new kind of insurance company was the conflicting interests and lack of transparency," Schreiber told Forbes. "It was mind-boggling that an industry that is performing such an important societal role is perceived so negatively. Insurance fraud is a serious symptom of this. That's why we made transparency and overcoming conflicts of interest a significant pillar of Lemonade."
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The 5-year-old company is disrupting the market by transforming insurance into what it says is a social good. It's a strategy that is not only beneficial to consumers and the world at large but absolutely essential to revolutionizing the insurance business model.
Here's how Lemonade works: The company takes a flat fee from customers' monthly premiums, puts the remaining balance toward claims and donates whatever is left to charity through its Lemonade Giveback program. This formula, the company said, "ties our hands so we'll never be in a position where we're deciding between making money and approving claims. We'll never fight over the same coin."
The Lemonade Giveback Program
Lemonade launched in 2016 and has had five givebacks thus far. According to its website, each year's giveback has been bigger than the last.
- In 2017, the company donated more than 10 percent of its revenue—$53,174—to 14 causes. Some of these include Citymeals on Wheels, the American Red Cross, Women in Need (WIN), the Robin Hood Foundation, New Story and more.
- In 2018, the insurance company donated a total of $162,135 to programs including Teach for America, the ACLU, Code to Inspire, New York Society for the Prevention of Cruelty to Children and more.
- In 2019, Lemonade donated a total of $631,540 to UNICEF, Charity: Water, the ACLU, the Trevor Project and more.
- In 2020, Lemonade donated $1,128,109 to Direct Relief programs, March for Our Lives, 350.org and more.
- Then, in 2021, the company has donated nearly $2,303,381 to the ACLU, the Trevor Project, March for Our Lives, Direct Relief and several others.
The donations have supported low-income students, bought food for malnourished children, delivered clean drinking water, funded suicide prevention for LGBTQ+ youth, and helped reunite immigrant families, according to the company's website. The Giveback program is also helping build one of the first 3D-printed homes for a family in need and sponsoring mental health support programs for high school students across the United States.
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Fostering Transparency and Social Good
Lemonade is one of the only public-benefit corporations in the world, a legal designation for a for-profit company that also seeks to improve the public welfare, according to Cornell Law School. Traditional corporations have one principal interest: maximizing value for shareholders. But public benefit corporations are allowed to balance profit-seeking with the interests of employees and customers and the targeted public benefit.
It is a model that Schreiber said fosters transparency and honesty between the company and its customers. Because Lemonade has nothing to gain from denying claims, it pays them relatively quickly, with about one-third of claims paid in just a few seconds, according to Schreiber. Such speed is possible through the company's AI-powered claims processor. Customers also may feel less inclined to embellish claims because they want their money to help the causes they care about.
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"Giveback is embedded seamlessly into every Lemonade policy and is an integral part of our business model. It's designed to solve the deep distrust that plagues the insurance sector, and to align interests between us and our customers," Schreiber told Forbes. "It's not a CSR [corporate social responsibility] initiative that's sprinkled on top of our business model. Partnering with over 92 nonprofits, Giveback is a differentiator both in the insurance and nonprofit industries, where the good behavior and good fortune of our customers determine whether and how much will go to their chosen cause."
Nonprofit Causes
Customers can choose where they want Lemonade Giveback donations sent among a list of nonprofits initially selected by the company. The nonprofits cover a range of issues, including:
- Ending human trafficking
- Protecting American forests and the Great Lakes
- Enriching the lives of people with intellectual and developmental disabilities
- Helping people struggling with substance abuse and addiction
- Feeding people with food insecurity
- Empowering Afghan girls and women to create financial and social independence
- Mental health support and crisis intervention
- Cancer research
- Coronavirus relief
- Supporting the efforts of Habitat for Humanity
- Suicide prevention
- Preventing animal cruelty
Then, as outlined above, a portion of Lemonade's revenue gets donated to programs that support these causes.
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What Lemonade Offers
Lemonade offers homeowners, renters, pet and term life insurance. The company anticipates offering vehicle insurance at some point in 2021.
Homeowners
Starting at $25 per month, Lemonade's homeowners' insurance will cover costs if a home or other structure on a homeowner's property is damaged due to events like a windstorm, fire, lightning, vandalism or theft. The policy also covers expenses if a home becomes unlivable, personal items are stolen, a visitor is injured, or if a lawsuit is filed alleging homeowner liability.
Renters
Beginning at $5 per month, renters insurance can help cover the costs of stolen and damaged items, water damage, fire and smoke damage, and also helps pay medical expenses if anyone is injured in the rental or if there is a lawsuit following an accident.
Car
For as low as $30 per month, Lemonade Car meets state requirements for liability. It offers tons of options for customization with collision, comprehensive, extended glass, temporary transportation coverage and more. Plus, users get free roadside assistance when they drive with the Lemonade app.
Policies are priced fairly based on the way you actually drive. Since Lemonade Car was built to be environmentally friendly, drivers enjoy low mileage discounts. There are extra coverages and savings for electric vehicle and hybrid drivers, plus Lemonade plants trees to help clean up after customers' CO2 emissions. Lemonade Car launched in Illinois in November 2021, with more states on the way.
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Pet
From $10 per month, Lemonade's pet insurance will cover diagnostics like blood tests, urinalysis, X-rays, MRIs, lab work, CT scans and ultrasounds. Procedures are also covered, including outpatient work, specialty and emergency care, hospitalization and surgery in case of an accident or unexpected illness. The base policy further covers injections and prescription medications your vet recommends as treatment.
Lemonade offers preventative packages that may help customers save money on things like annual physical exams, parasite and heartworm tests and vaccines for rabies, distemper (DHLPP) and bordetella. Pet insurance policies are offered in 36 states, and more states are continually being added. Customers can go to any licensed veterinarian in the United States.
Term Life
Starting at $9 per month, Lemonade offers term life insurance through North American, which has been around for more than a century. Anyone ages 18 to 60 who is generally healthy can apply without the need for a medical exam. Prospective customers who have a history of heart disease, cancer or other serious conditions may not be eligible for the policy. If approved, the premium is locked in for the entirety of the term.
Keep in mind that you can save when you bundle Lemonade products. For example, you get a discount when you combine any Lemonade product with its car insurance.
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Be Part of the Disruption
Prospective customers can visit Lemonade's website or download its app to get started on a quote. The company has developed proprietary technology to help customers quickly and easily obtain insurance policies, customize and adjust coverage and file claims with the app.
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