Although “FinTech” is everywhere, it’s fair to say that the insurance industry is lagging a bit.
While investing has moved online and robo advisors are harnessing algorithms to offer better services and prices, most insurance companies in Canada are still kicking it old school. That means largely relying on a small network of brokers, using paper or emailed applications, and providing quotes for insurance products manually. Very little has been done to modernize this dinosaur process — until recently.
Enter Lemonade Insurance — a U.S.-based insurance company that’s disrupting the insurance industry. The company offers unique, cutting-edge features for customers, including an entirely online interface and rapid claim reimbursement.
But the biggest difference is that Lemonade Insurance donates its excess claims to charitable organizations. Yes, you heard right: leftover premiums are paid out to charities selected by its customers. This mandate for social good is unique, and it has helped the company gain a large customer base in a very short period.
If you’re enticed by this renegade structure of Lemonade Insurance, keep reading to find out what the hype is all about.
About Lemonade Insurance
Lemonade Insurance was cofounded in 2015 by tech industry veterans Shai Wininger (also cofounder of Fiverr) and Daniel Schreiber. The company has grown to more than 500 employees and $94 million in annual revenue. Lemonade Insurance originally served the United States but has since expanded into France, the Netherlands, and Germany.
Lemonade Insurance is a Benefit Corporation, which means that it’s committed to a higher standard of purpose, accountability, and transparency than traditional corporations. In an interview with Forbes, Cofounder and CEO Daniel Schreiber said that the insurance industry was out of touch, old school, and fraught with conflicting interests and a lack of transparency.
Lemonade Insurance set out to disrupt the insurance industry and transform insurance from necessary evil to social good. One way that it does that is by donating its excess premiums to its customers’ chosen charities.
What Makes Lemonade Insurance Different
Lemonade Insurance is different from the average insurance company in three key ways.
First, Lemonade Insurance operates totally online. You’ll get an instant quote and you can buy insurance with no delays and no need to visit an office in person. While many insurance companies will allow you to complete your application online, very few will offer more than a quote before you’re required to get in touch with a real person.
The second way that Lemonade Insurance differs from its competitors — and what truly sets this company apart — is what it does with your premiums. When you sign up for Lemonade Insurance, you’ll designate a social cause to receive your excess premiums. When you select your cause, you’ll be included in a cohort of people who have also chosen the same cause, and the premiums that you and the other people in your cohort pay will cover any insurance claims. Lemonade Insurance calls this peer-to-peer insurance coverage. Up to 40% of Lemonade Insurance’s premiums are sent to these common causes every year.
Finally, since all excess premiums are donated, Lemonade Insurance has no incentive to deny claims, which means it pays out about a third of its claims in a matter of seconds. These payments are exceptionally swift and relatively unheard of in the insurance industry—one customer’s claim was even paid out in only three seconds! Lemonade Insurance also says that since their customers know embellishing claims will hurt a charitable cause instead of a large company, it’s incentivized to make fewer claims or avoid trying to make the largest claim possible.
Types of Insurance Offered
Lemonade Insurance offers the following types of insurance to its customers:
Is Lemonade Insurance Coming to Canada?
Here’s the bad news: you can’t use Lemonade Insurance if you are located in Canada. While the company has expanded to a few countries outside of the United States, it hasn’t set up shop north of the border just yet.
While Lemonade Insurance doesn’t seem to have immediate plans to move into Canada, we may still have the opportunity to purchase insurance through the company in the future.
When Lemonade Insurance does expand into Canada, it will have to compete with the insurance providers we mentioned above. Most of them already offer Canadians online access to insurance coverage for low monthly premiums. That said, Lemonade Insurance’s Benefit Corporation status is a unique offering for Canadians.
Overall, we don’t expect Lemonade Insurance’s entrance into the Canadian market to be game-changing for the insurance industry. Still, it brings a unique product that will undoubtedly help spur change.
Alternatives to Lemonade Insurance in Canada
Unfortunately, Lemonade Insurance isn’t yet available in Canada, but several alternatives have managed to take the insurance purchasing process entirely online. If you’re looking for a quick and easy insurance policy for your home, business, or apartment, consider the following options:
Based in Vancouver, APOLLO Insurance offers a wide range of insurance policies for your residence, car, or rented home. APOLLO also provides a wide variety of affordable business insurance options. The platform is easy to use—you can complete your application and purchase insurance in under 5 minutes. Read our APOLLO review.
Square One Insurance
Square One Insurance is an online insurance company that offers home and renters insurance. Using the platform, you can get a quote in minutes, and its insurance policies, which start at $12 a month, include personalized add-ons.
InsuranceHotline.com is an online insurance platform that brings you the best quotes from various insurers. InsuranceHotline.com offers a wide variety of insurance, including auto, home, apartment, motorcycle, life, commercial, and travel. With a single search, you can compare quotes from a variety of reputable insurers in 5 minutes or less.
Is Lemonade Insurance Stock a Good Investment?
If you’re disappointed that you can’t purchase Lemonade Insurance and are looking for another way to get involved with the company you can buy their stock. Lemonade Insurance went public in July 2020 on the New York Stock Exchange (NYSE: LMND).
The stock has had its ups and downs since July 2020, putting in a lacklustre performance in recent months. LMND is down almost 60% from its 2021 high of about $180 per share. That said, some consider Lemonade Insurance a good buying opportunity since the company is still young, and it has growth potential in the long term. In particular, the company’s plans to continue expansion into Europe and add new insurance products to their lineup, like car insurance, present opportunities for growth.
If you’re considering buying Lemonade Insurance stock, we advocate a balanced portfolio approach. Using a discount brokerage, you can build a diversified portfolio of ETFs and reserve some money to buy stock without overexposing your portfolio. Lemonade Insurance stock is relatively volatile, so we recommend that you limit your holdings to a small percentage of your portfolio.
Can I buy Lemonade Insurance in Canada?
Lemonade Insurance is available in the United States, France, the Netherlands, and Germany. Unfortunately, Lemonade Insurance is not yet available in Canada, but we expect them to eventually expand to offer their industry-disrupting products in Canada.
Is Lemonade really peer-to-peer insurance?
Peer-to-peer insurance lets individuals offer coverage to each other, either on an individual or small group basis. Peer-to-peer insurance allows individuals to collect premiums and make payouts directly within the small group. From this perspective, Lemonade Insurance is not a proper peer-to-peer insurance organization, as it groups individuals into cohorts, but those cohorts are pretty large. Excess premiums from these cohorts (that means premiums that are not paid out as claims) are donated to a common charity, but other than that, there are no peer-to-peer lending characteristics.
Is Lemonade a legit insurance company?
Lemonade is a legitimate insurance company that underwrites their own policies and insures themselves through Lloyd's of London. Demotech, a financial stability rating company, rates Lemonade Insurance's financial stability as “A,” which is an excellent rating. Lemonade Insurance is a publicly-traded company listed on the New York Stock Exchange.
The Last Word
Unfortunately, there is no Lemonade Insurance in Canada yet, but keep an eye out for future expansion plans. In the meantime, there are some great online insurance providers in Canada that streamline the application process and pass along cost savings to the customer. A few minutes of your time online could end up saving you a bundle on your insurance. Worth it!
READ MORE: Insurance and Why You Need It