AI-based online insurance co Lemonade raises $120m

Daniel Schreiber and Shai Wininger  photo: PR

The C round in Lemonade, which has its development center in Tel Aviv, was led by Softbank Group.

After sizeable investments in WeWork and Ori Allon's Compass, Japan's Softbank Group is again investing heavily in Israeli entrepreneurs. Artificial intelligence-based insurance company Lemonade announced a $120 million C round today, led by Softbank and with participation by most of the company's existing investors. This round brings the total raised to date by Lemonade since its founding in 2015 to $180 million, from a wide range of investors, among them Aleph, Google Ventures, Sequoia, and General Catalyst.

Lemonade was named among "Globes'" most promising startups of 2017.

The transaction is expected to close in the first quarter of 2018, subject to receipt of regulatory approvals and satisfaction of other customary closing conditions. Lemonade says it plans to use the funds to accelerate its global expansion in 2018. The company currently employs about 60 people, half of them in its Tel Aviv development center, and half in New York.

Lemonade launched its activity in New York in September 2016,and it has so far sold 70 million insurance policies to home renters and homeowners. It is now licensed by 25 states, home to two-thirds of the US population, and is active in eight of them. The company's founders are Shai Wininger, who serves as president, and CEO Daniel Schreiber, both of them experienced technology players. Among other things, Wininger was one of the founders of Fiverr, and Schreiber was a senior executive at SanDisk. They were joined by behavioral economist Prof. Dan Ariely.

Besides putting insurance on an artificial intelligence-based app, and cutting out middlemen and paperwork, Lemonade offers a unique pricing model: a fixed fee of 20%. Whatever is left over and above the fee after policy payouts goes to social organizations at the insured's choice. The company thus aims to reduce insurance fraud, and to avoid the built-in conflict of interests in the traditional insurance industry. Lemonade reports that during its first annual 'Giveback’, it gave back over 10% of its revenue to social causes. It also set a world record, when it paid a claim in 3 seconds. During this time its system checked the insured's policy, ran 18 algorithms designed to prevent fraud, and transferred a payment order after deducting the excess, which is added to the regular premium. It has launched insurance as an API, and used AI to offer the first insurance policies with ‘Zero Everything’: zero deductible, zero rate hikes, zero depreciation.

“The insurance brands we know today came of age in the era of the horse-drawn carriage,” said Schreiber, “but insurance is best when powered by AI and behavioral economics, which is why we believe that companies built from scratch, on a digital substrate and with a social mission, will enjoy a structural advantage for decades to come.” In the US, Lemonade is incorporated as a public benefit corporation, that is, a for-profit enterprise with a mandate to take into account social considerations as well.

"2017 is our first full year in the market. The original plan was to end it with 13,000 insured homes. I'm happy to say that we are about to end it with nearly 100,000 homes. The second thing we are announcing is the intention of expanding to other countries outside the US. That's very interesting, because if you look at traditional insurance companies, very few of them operate on different continents. This shows how new technology and working directly viv-a-vis the customers makes it possible to do things that the classic industry, based on agents and offline activity can't do, enabling us to develop at an extraordinary rate."

Wininger refuses to provide details on which additional countries the company seeks to expand to, or to disclose whether and in which countries the company has received regulatory approval to do business. "We are constantly active on many planes, some of which we make public and some of which we keep close to our chest. We will make it public the moment we feel that it's the right time from the point of view of the market's readiness and the move we are making. Of course entering any market requires approval and setting up the right company structure."

In Lemonade's announcement today, Wininger said, "SoftBank is an ideal partner for us and we are thrilled to have them on board. We share SoftBank’s conviction that big data and machine learning are set to profoundly remake our entire industry, and SoftBank has the vision and means to enable this common vision to become a reality.” David Thevenon, a senior investment professional within the SoftBank Group who will join Lemonade’s board, said, “By combining big data and AI with a seamless user experience, Lemonade is truly revolutionizing the insurance industry. We have been impressed by the team’s creative approach to disrupting the traditional insurance model with innovations like Zero Everything policies and Giveback, and we look forward to supporting the company’s rapid growth.”

Published by Globes [online], Israel business news - www.globes-online.com - on December 19, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

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Daniel Schreiber and Shai Wininger  photo: PR
Daniel Schreiber and Shai Wininger photo: PR
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