Lemonade Insurance: I do not think P2P means what you think it means

  • Newly launched Lemonade Inurance's charity twist could reduce fraudulent claims and nab the socially-conscious policyholder.
  • But is it really a P2P insurer?

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Lemonade Insurance: I do not think P2P means what you think it means
On September 21st, 2016, P2P renters and home insurance firm Lemonade launched with a great deal of fanfare. There are a number of factors contributing to the positive buzz the app’s launch has generated: its simple, sleek design, the fact that they were able to roll it out after just one year - a rarity in the insurance industry - and of course, it’s finer fintech attributes. According to the Lemonade website, it takes just 90 seconds to get insured, and 3 minutes to get claims paid, all with the help of Jim and Maya, the app’s helpful AI chatbots. Not to worry; policy holders who want to speak to a human at any point in the process can actually reach the real Jim and Maya at Lemonade’s office. However, one of the fintech concepts blatantly missing from Lemonade is P2P, which seems to be a big part of its marketing strategy. The company bills itself as the world’s first P2P insurance company. The P2P model of lending, in which online platforms match borrowers directly with investors, is fairly straightforward. Yet that model is nowhere to be found in Lemonade. Instead, it turns out that Lemonade, like its German insurtech cousin, Friendsurance, is using the term very differently than online lenders do. With Lemonade, P2P means that the company pools the premiums of its policyholders to pay out claims…like any other type of traditional insurance. The Lemonade twist is how the company connects policyholders to one another. While insurtech companies like Friendsurance or the UK’s Bought by Many pool people according to the type of insurance they're taking out, Lemonade groups people by having them choose a charity when they purchase a policy. Unlike other insurance companies, which retain any unclaimed premium money, Lemonade intends to donate said money at the end of the year to the pool’s charity of choice. The company hopes that connecting people to one another through social action will deter them from submitting fraudulent claims. The fact is that P2P insurance like Lemonade's isn't as P2P as marketplace lending is, nor is Lemonade the first insurtech to pool people around a common thread: Friendsurance's shareconomy has been around since 2010. Still, Lemonade is a unique offering in the state of NY, and its clean design, the low premium cut it takes - 20 percent as opposed to the industry’s average 35 percent - and its social component are sure to appeal to the Big Apple’s digitally savvy.

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