Or should I say, making lemonade?
According to their neon pink website, Lemonade Insurance Company is a property and casualty company that is “transforming the very business model of insurance.”
Branding themselves as an insurance company for urban dwellers, it seems Lemonade was created to directly address many insureds’ pain points: rate hikes, coverage cancellations, high deductibles and so on.
Lemonade is combining technology and transparency to create “an insurance experience that is fast, affordable and hassle-free.”
They even go so far as to call themselves the closest thing to an undo button for real life.
One of the many things that make Lemonade unique is their Giveback policy, which donates any leftover premium at the end of the year to charity. These donations, however, are not tax-deductible.
Another thing that makes Lemonade unique is its lack of personal service. Instead, everything is done online or through a mobile app driven by artificial intelligence (AI). This AI takes the shape of customizable bots named Maya or Jim, for example.
After Lemonade’s first anniversary in September, the company launched a new product called Zero Everything.
Zero Everything means that customers can file up to two claims per year without deductibles, depreciation or rate changes.
Simply put, Zero Everything claims to give you one dollar for every one dollar lost.
While the new policy sounds great in theory, it seems to be more clever marketing hype than anything truly revolutionary.
One of the features of the new Zero Everything policy is zero depreciation. Zero depreciation, otherwise referred to as replacement cost coverage is something most homeowners insurance policies already provide.
Basically, if your $1,000 couch is destroyed, you get $1,000. If the price of that couch increases to $1,500, replacement cost coverage will give you $1,500 to buy a new couch.
This isn’t necessarily groundbreaking stuff.
Zero Rate Changes
In another provision of the Zero Everything policy, Lemonade states that when you submit a claim, your rate won’t increase as long as it’s not abused.
The company’s website is very careful to include this abuse disclaimer, but what exactly constitutes abuse?
It’s not clearly outlined on the website and it’s definitely something that needs some elaboration.
Last but not least, let’s talk about zero deductibles.
Lemonade is the world’s first insurance company that’s doing away with deductibles, which have long been a pain point for insureds.
The company states that because they utilize AI, which greatly reduces administrative costs, deductibles are no longer needed.
However, a lack of deductibles means an increase in the price policyholders pay.
Not Enough Sugar
While Lemonade is indeed making waves with its new Zero Everything policy, the deal isn’t as sweet as it appears.
Deductibles exist for a reason whether insureds like them or not. Without them, policyholders pay higher premiums, so there’s not much money saved in the end.
While too soon to tell if this concept will take hold, the marketing and premise is an attempt to target the Millennial Generation’s quest for ease and speed of gathering information and processing a historically complicated transaction. Stay tuned!
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