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Could Lemonade’s life insurance business still be a major growth driver?

By on December 14, 2021 0


Insurance technology company Lemonade (NYSE: LMND) Most of its money comes from renters ‘and homeowners’ insurance, and recently launched auto insurance as its next big growth market. However, the largest insurance market in which Lemonade operates is life insurance, which currently only accounts for 2% of its business.

In this fool live Video clip, recorded on november 29, Lemonade co-CEO and co-founder Daniel Schreiber discusses life insurance progress so far and the future direction of this part of the business.

Matt Frankel: I know auto insurance is probably the most exciting opportunity out there, but it’s not the only other insurance vertical you’ve launched recently. Was your life insurance started, I mean about a year ago, a little over a year ago? It’s only about 2% of your business right now. Why didn’t it spread the way you hoped Lemonade Car would?

Daniel Schreiber: This is an excellent question. I think they launched a little less than a year ago, but about 45 weeks ago, something like that. A few things to say about this. One is this: by certain criteria, he is doing very well. Of course our denominator is pretty big now, so getting 2% or something big enough is getting harder and harder. If I just plot the growth rate of our first product launched, tenant insurance, and I have that on the dashboard, its growth chart, and the growth chart of life insurance since its launch. In the last 45 weeks, life insurance is actually 3x where renters were at this point.

This is just one point to keep in mind: the denominator can be confusing. When I take it all out and look at it in absolute dollar terms, life insurance generates three times what our tenant insurance, which is our bread and butter, was at the same stage. That said, and it does so at over 90% gross margin because we don’t write on our own paper. We are not allowed to do life insurance on our own paper. We’re reselling an insurance product that’s on someone else’s paper, which means it’s pure margin, which is pretty good as well.

But that said, life insurance is – and we knew it was, we even talked about it in an investor meeting launched, a letter to shareholders, a call to investors – life is a very difficult business. Insurance technicians who have tried to be successful on their own only with life insurance have struggled. Their customer acquisition costs are very high. and it’s a market where we haven’t seen any outright digital players doing as well, with a few exceptions. For us, it was mainly a question of supplementing the offer for our policyholders, ensuring that the thesis of making them fast and then meeting all of their needs over time is fully fulfilled. Because it’s not on our paper, because it’s something we sell, technically the experience is still pure lemonade. But from an accounting or plumbing point of view, it’s written on someone else’s paper, it also means that the work with regulators is mediated by a third party, which makes it quite cumbersome. .

For all of these reasons, we believe he is doing exactly what he needed to do. It grows faster than tenants, customers are coming together, and I think that will remain the central way they buy life insurance, is that they will come for tenants or for the house or for the car, for something else, and they will add on, as opposed to more native buyers. Thus, pet insurance represents two-thirds of new and growing customers. This is true for tenants. That’s, I think, is going to be true over time for Car, and then we get cross-selling in all directions. This is what we have seen in the other products and what I plan to happen in the future as well.

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