Lemonade's new open source policy signals 'adapt or die' to insurers

Lemonade's new open source policy signals 'adapt or die' to insurers


The Lemonade brand has become synonymous with disruption in the insurance industry since the company’s start in 2015. In May, the AI-powered insurance platform turned heads again, this time with its launch of Policy 2.0, billed as the world’s first open source policy. In a post on the company’s website, Lemonade CEO and co-founder Daniel Schreiber underscored that the new policy is “simple, approachable, relevant, and digital.”

Alex Maffeo, founder and CEO of Boost Insurance, which touts the insurance-as-a-service model, was impressed with Lemonade’s new policy, but found it lacking in some respects.

“In theory, I love it,” he told Insurance Business. “I think it’s much needed in the market with the trend towards additional transparency in the insurance market and really in financial services in general, but I don’t know how it’s actually going to work in practice. I think if you look at insurance at its core, it’s contract law, so it’s highly regulated.”

Maffeo doesn’t know how Lemonade will go about removing legalese from the insurance policy itself without upsetting regulators, and suggests a “half-measure” to create transparency for the consumer without completely blowing up the way insurance policies are written today. Policy 2.0 could more or less act as an attachment to an insurance policy that translates it into layman’s terms, he says, though it would still be backed by a legal contract.

“The policy itself is not changing, it’s just the way it’s presented to the consumer, which I think is great and definitely helps improve the user experience and gain trust with the consumer,” said Maffeo, adding that the open-source side of Policy 2.0 is a way for Lemonade to gather information on what consumers want to see from their insurance policies going forward.

“Their goal is to crowdsource consumer preferences, so they’re seeing how a consumer would interact with that policy. They’re probably gathering loads of data on what coverages are picked, and mostly likely on the backend, most of the data analytics that they’re running are probably a little bit more sophisticated than what you’d find at a normal broker or agency.”

Tracking that data could be a long-term play to further develop policies that are better tailored to people’s insurance needs, according to the Boost CEO, who says he’s a big fan of the company on the whole, even if some in the industry scoff at its market moves.

“They’re doing a lot of good things. I think if you just look at how the technology itself is improving the user experience, that’s a huge step up from what was found in the market before they entered,” he explained, noting some caveats. “They’re building a brand [and] they are burning a lot money. Their underwriting is improving, so some of the ratios that you see in the market are slightly skewed, but really I think they’re doing a lot to at least put the industry on notice and let them know that this is how the modern consumer behaves, this is what they want, and it’s a matter of adapt or die.”

Lemonade is just one part of the bigger picture – the industry is changing, as are customers’ expectations from their insurance, and an increasing number of people trust technology companies over traditional financial services providers.

“This whole brand and messaging of financial security, and commercials with big high-rises and huge boardrooms – those types of brands just don’t resonate with the modern consumer anymore, so they would much rather engage with a tech-first, user-friendly interface when buying something like [insurance] versus that buttoned up guy in a suit,” said Maffeo, adding that this mentality is also affecting how insurance is sold. If a traveler is booking an Airbnb, it makes sense to offer them travel insurance right then and there, rather than forcing the consumer to seek it out themselves.

“They don’t want to think about insurance at all, so we’re seeing a lot of bundling of insurance with other products and services, and we’re seeing a lot of insurance offered at the most natural point of sale versus it being its own standalone product.”


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  • Jim 6/13/2018 1:20:42 PM
    Its more likely that "LEMONADE" will die..Truly a legend in thir own mind
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  • BayArea 6/13/2018 6:43:04 PM
    I don't see it happening, reading the policies is not something that policyholders do prior or just after purchasing a policy, so it's not a deal breaker. What more important is how they make out after a claim and how well the agent does making sure that additional endorsements have been addressed. Lemonade Insurance and it's founders are legends only in their own mind, there is just so much foolish arrogance here.
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  • Patrick Tv-ready 6/14/2018 9:40:50 AM
    I have worked for direct start-up competitors and agencies alike, Lemonade is a force to be dealt with. Now that force likely will meet the unmovable object known as the Dept. of Insurance. Love everything about Lemonade and how they are making headway in a stagnant technological industry. But those who oppose change are going to cost them $ in every way possible till the embrace is changed. The whole Insurance industry as a whole, including the old boys Network, should have the fear in the back of their mind that they are becoming "Blockbuster" in a world geared for Netflix.

    Do not become dinosaurs.....
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