Metromile and Lemonade target different segments of the online personal lines marketplace
In another sign of the growth of the Insurtech revolution, two more insurance start-ups have entered the fray of the online insurance marketplace . While neither of them are based in Massachusetts, they both will likely be doing business here in the Commonwealth sooner rather than later.
Pay-per-mile Metromile announces funding windfall and carrier acquisition
Metromile, one of the first sites dedicated to pay-per-mile car insurance, announced this past week that it has raised $191.5 million in funding. Flush with cash, the company also announced last week that it was acquiring Mosaic Insurance Company with it fifty-state licenses for approximately $22 million. The remaining funds, after the Mosaic purchase, will fuel “growth initiatives.”
Closing this financing round not only accelerates our nationwide expansion but allows Metromile to operate as an end-to-end insurance company which includes providing our customers a fully seamless claims experience,” said Dan Preston, CEO at Metromile. “This foundation, coupled with our expertise in technology, will allow us to deliver exciting new features to our drivers that make car ownership easy, personal and affordable while providing an exceptional customer experience.
The current leader in the pay-per-mile car insurance market segment
As the leading pay-per-mile company, Metromile will likely increase that lead as it expands into all 50 states. The company currently is only available in seven states: California, Illinois, New Jersey, Oregon, Virginia and Washington, but now has, with its new licenses, rapid state-expansion plans scheduled for calendar year 2017.
In addition to offering pay-per-mile car insurance, the company also offers a smart driving app and an in-car telematics device which helps customers pinpoint their car’s exact location. The device also allows customers to:
- track detailed information on every trip they take using trip tracking,
- keep their car in tip top shape with vehicle diagnostics and car health,
- as well as avoid parking tickets via the app’s street sweeping alerts feature (in select cities)
While Metromile is pay-per-mile, Lemonade is peer-to-peer insurance
Taking aim at the online homeowners insurance marketplace is Lemonade. While Metromile was collecting its cash last week, Lemonade, dubbing itself the world’s first “peer-to-peer” insurance company, was licensed as a full-stack insurance carrier by the state of New York last week. Effectively immediately, New York homeowners and renters may now get their insurance from the online platform. The company is currently rated “A, Exceptional” by Demotech. Regulated by the state of New York, the company is reinsured by Lloyd’s of London and Berkshire Hathaway.
“Technology drives everything at Lemonade” said Shai Wininger, President and co-founder. “From signing up to submitting a claim, the entire experience is mobile, simple and remarkably fast. What used to take weeks or months now happens in minutes or seconds. It’s what you get when you replace brokers and paperwork with bots and machine learning.”
Twenty percent fee with Giveback to charities
Lemonade differs from other on-line sites in what it doesn’t do. While the company’s technology allows it to cut out brokers thereby offering homeowners policy rates starting at $35, it also reduces its costs through giving or “Giveback.” As the company explains, each year the leftover money is donated to various causes. The causes are selected or grouped via virtual groups of like-minded people or “peers.” The result is that Lemonad uses the premiums from each of these virtual group to pay the claims of the individuals. Any money left over is given to the group’s common cause.
The rationale for Lemonade’s Giveback is that it will reduce fraud. Lemonade’s belief is that insured’s that purchase insurance with the idea that charities will benefit are less likely to engage in submitting inflated or fraudulent claims.
It’s not our money.” said Daniel Schreiber, CEO and co-founder at Lemonade. “We repeat that sentence like a mantra, and have it emblazoned on our office walls. We never want to be in conflict with our customers. We never want to make money by denying claims. And that means giving back underwriting profits.
Knowing that every dollar denied to you in claims is a dollar more to your insurer, brings out the worst in us all.” said Professor Dan Ariely, Chief Behavioral Officer, Lemonade. “So we architected Lemonade to avoid conflicts of interest. We take a flat 20% fee, and give unclaimed money to causes our policyholders care about. Since we don’t pocket unclaimed money, we can be trusted to pay claims fast and hassle-free. As for our customers, knowing fraud harms a cause they believe in, rather than an insurance company they don’t, brings out their better nature too. Everyone wins.”
A look at Lemonade
The following is a promotional video from Lemonade for those who are intersted: