10/16/2020
First, Fire All The Brokers: How Lemonade, A Millennial-Loved Fintech Unicorn, Is Disrupting The Insurance Business
DAILY COVER | 53,477 views | May 2,
2019, 06:00am EDT
First, Fire All The
Brokers: How
Lemonade, A
Millennial-Loved
Fintech Unicorn,
Is Disrupting The
Insurance
Business
Jeff Kau in Forbes Staff
IMAGE COURTESY OF LEMONADE
Fintech
I cover fintech, cryptocurrencies, blockchain and
investing.
Kristin Stoller Forbes Staff
Careers
I cover all things related to careers, jobs and the
workplace.
This story appears in the May 31, 2019 issue of Forbes
Magazine. Subscribe
I
n the summer of 2017, a Los Angeles man in
his mid-20s put on a necklace, blond wig and
makeup and made a cellphone video
describing how his camera and other electronics
had been stolen. He submitted the video to his
renters insurance provider, Lemonade, which paid
the $677 claim in two days. Three months later,
dressed in jeans and a T-shirt and using a
different name, email address and phone number,
the same man submitted a video claim for a stolen
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First, Fire All The Brokers: How Lemonade, A Millennial-Loved Fintech Unicorn, Is Disrupting The Insurance Business
$5,000 camera. But this time, the algorithms that
are a crucial part of Lemonade’s highly automated
systems flagged the claim as suspicious. Last year,
the persistent fraudster, this time wearing a pink
dress, tried again, only to be foiled once more by
Lemonade’s computers.
Using artificial intelligence, a mobile app and
other tech-centric methods, Lemonade founders
Daniel Schreiber and Shai Wininger are turning
the centuries-old business of property insurance
into a Millennial-friendly consumer product. In
2018, its second full year offering renters and
homeowners insurance, Lemonade took in $57
million in premium revenue from 425,000
customers, 75% of them under 35 and 90% of
them buying such insurance for the first time.
Already operating in 22 states, the 170-employee
New York-based startup expects to double
revenue this year and expand to all 50 states and
Europe. To fund that growth, Lemonade raised
$300 million in April at a valuation, says a source,
of more than $2 billion. That would make the
founders’ combined 20% stake worth in excess of
$400 million—not bad for two middle-aged guys
who until 2015 knew almost nothing about the
insurance business.
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First, Fire All The Brokers: How Lemonade, A Millennial-Loved Fintech Unicorn, Is Disrupting The Insurance Business
Lemonade cofounder, COO and President Shai Wininger previously
started four other businesses, including Fiverr, an Israel-based
global marketplace for freelance work.
IMAGE COURTESY OF LEMONADE
Not surprisingly, the founders cast their status as
insurance industry outsiders as a plus, since it
freed them to think differently. CEO Schreiber,
48, was born in Britain, raised in Israel, earned a
law degree in London and started working on tech
mergers at a Tel Aviv firm. At 26, he quit law to
cofound an internet security company. While that
startup wasn’t a big success, Schreiber went on to
hold senior marketing and management jobs in
tech, most recently as president of Israeli
wireless-charger maker Powermat.
But he wanted another go at his own startup and
kept looking for a big idea. By 2015, he had
concluded that insurance was ripe for tech
disruption because, he says, “every person in the
nation, in the world, needs insurance,’’ and yet
many distrust traditional insurers. A VC
introduced Schreiber to Wininger, a self-taught
Israeli coding and design whiz who had already
cofounded four businesses, including Fiverr, an
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First, Fire All The Brokers: How Lemonade, A Millennial-Loved Fintech Unicorn, Is Disrupting The Insurance Business
Israel-based marketplace for freelance work.
Wininger, now 45, quickly signed on as cofounder,
heading up tech and product design. “When
you’re an entrepreneur and you find something
like that, it’s a once-in-a-lifetime opportunity that
you have to go after,” he says.
Holed up in a room with a whiteboard, the
founders sketched out what an ideal insurer
would look like—from a Millennial’s point of view.
It would be online only (no paper or insurance
brokers), low-cost, easy to deal with and
“trustworthy.” They weren’t naïve about needing
insurance expertise and, in May 2015, recruited
Ty Sagalow, a 36-year industry veteran, naming
him chief insurance officer. Together, the three
made a crucial and gutsy decision: Rather than
sell policies backed by established insurers (the
way fintech competitors Hippo and Jetty do),
Lemonade would become a licensed carrier itself,
retaining claim liability on its own balance sheet.
That meant Lemonade could pay claims faster and
operate under a unique business model that has
become a pillar of its marketing. The company
takes 25% of insurance premium revenue for
administrative costs and potential profits. The
other 75% is used to fund customer claims, buy
reinsurance (laying off some risk) and pay certain
taxes and fees, with anything left going to
charities that customers choose. The socialcompact pitch: Lemonade can’t profit from
denying legit claims, and customers making bogus
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First, Fire All The Brokers: How Lemonade, A Millennial-Loved Fintech Unicorn, Is Disrupting The Insurance Business
claims are cheating charity, not some greedy
insurer.
Still, becoming a real, regulated insurance carrier
meant Lemonade needed more time to launch and
more capital to grow. (A carrier typically must
maintain cash reserves equal to at least a third of
revenue, Sagalow notes.) So far, the capital has
flowed—and from some big names. Through 2017,
Lemonade raised $180 million in four rounds. In
2019, it raised $300 million, led by billionaire
Masayoshi Son’s SoftBank with participation from
GV (Alphabet’s venture arm), Josh Kushner’s
Thrive Capital, German insurer Allianz, General
Catalyst and OurCrowd.
The Newes
Since Forbes published its annua
list last fall, three have earned ten
Lemonade
FOUNDED: 2015
HEADQUARTERS: New York City
TOTAL MONEY RAISED: $480 million
LATEST VALUATION: $2 billion
Millennial-friendly web platform provides disco
by donating a portion of revenue to charity
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First, Fire All The Brokers: How Lemonade, A Millennial-Loved Fintech Unicorn, Is Disrupting The Insurance Business
Lemonade issued its first policies in September
2016 in New York. By January, marketing man
Schreiber was boasting in a press release and blog
post that Lemonade had set a world record by
paying one New Yorker’s claim for his stolen
Canada Goose parka in three seconds—the time it
took Lemonade’s claims bot to run 18 antifraud
algorithms and send bank instructions to deposit
$729 in the man’s account. Automation also
allows Lemonade to offer policies at a very low
price: renters insurance starting at $5 a month
and homeowners starting at $25. On the review
site Clearsurance, Lemonade ranks second in
customer satisfaction for renters insurance,
behind only USAA.
While Lemonade’s growth has been steep, so too
has its learning curve. At the end of 2017, its loss
ratio—the amount it pays in claims divided by the
premiums it collects—was an unsustainable 166%,
compared to 65% to 70% for large insurers. Part
of the problem was that Lemonade had too little
customer experience on which to train its
algorithms, which it uses for approving
applicants, pricing risk and determining whether
a claim should be paid without humans getting
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First, Fire All The Brokers: How Lemonade, A Millennial-Loved Fintech Unicorn, Is Disrupting The Insurance Business
involved (30% are). Indeed, by the first quarter of
2019, its loss ratio had dropped to a healthier
86%. Schreiber predicts it will continue to fall.
“What we’re seeing here is something that is going
to be very traumatic for the whole insurance
space,’’ he says. “Data is overtaking expertise.”
So far, Lemonade is only a bit player, with a 0.1%
share of the homeowners and renters insurance
markets combined, compared with 19% for State
Farm and 10% for Allstate, according to data from
17 states collected by the Insurance Information
Institute. But the big guys have taken note. In
October 2018, State Farm released a star-studded
ad spoofing budget insurance bots and suggesting
they couldn’t compete with human agents.
Lemonade’s cheeky response? It tweeted the ad
and paid to promote it on YouTube. “This is
2019,” Schreiber scoffs. “You don’t produce ads
mocking the power of technology.”
Jeff Kau in
I cover fintech, cryptocurrencies, blockchain and
investing at Forbes. I’ve also written frequently about
leadership, corporate diversity and entrepreneurs.
Before… Read More
Kristin Stoller
I'm the Careers reporter at Forbes. Before joining Forbes,
I reported for the Hartford Courant and the New Haven
Register, covering breaking and local news. A
Connecticut… Read More
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First, Fire All The Brokers: How Lemonade, A Millennial-Loved Fintech Unicorn, Is Disrupting The Insurance Business
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