Insurance as Lemonade

Allianz invests in Israel-based player Lemonade. This was big but not surprising industry news last week, and Accenture has Lemonade on the radar since it was founded last autumn. In fact, Lemonade might be the world’s most-hyped Insuretech company of today. Allianz strategic investment makes it time to take a sneak behind the hype and try to understand how Lemonade is innovating the traditional business model of property and casualty insurance.

The traditional P&C insurance business model, put simply, is to compensate their customers for their loss or damage in specified events and to take monthly premiums from their customers in return. Without any loss event actually occurring, this business model would apparently be a very profitable one. This potential profit is partially eaten up as soon as the customer files a claim, and the insurance company grudgingly pays the contractually agreed compensation. Each customer claim adversely affects the P&C insurers business case and the key metric of combined ratio, which figures the total claims cost as a percentage of premium income. This is why claim settlement usually involves a lengthy process with the insurer examining if all contractual conditions are really met by the customer.