Lemonade IPO: It’s All About AI (Artificial Intelligence)

As the economy starts to reopen, the IPO market has also started to get back on track. And one of the more interesting companies that plans to list is Lemonade. It operates a mobile app for property and casualty insurance, with the focus primarily on renters and homeowners policies. The Lemonade IPO is likely to hit the markets within the next few weeks.

Lemonade IPO: It’s All About AI (Artificial Intelligence)
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In 2015, Daniel Schreiber and Shai Wininger co-founded Lemonade. Before this, Schreiber served as the CEO of Powermat Technologies (a wireless charging company) and he started an Internet company back in the late 1990s. As for Wininger, he founded several companies, including Fiverr International (NYSE:FVRR), which has a market value of more than $2 billion.

The founders saw the insurance industry as ideal for a disruption opportunity. After all, the category has seen little innovation over the years.

While Schreiber and Wininger had no experience in the industry, they saw this as an advantage. This meant they could bring a fresh perspective to the opportunity

How Lemonade Works

Keep in mind that the founders did hire insurance experts and veterans. The strategy was to become a full-blown insurance company – not just a brokerage. This meant Lemonade would have complete control over the life cycle of the customer experience, from selling policies to paying claims.

Yet this strategy was not easy. Becoming an insurance industry means dealing with complex state laws and maintaining certain capital requirements. As a result, it took about a year until the company sold its first policies (in New York).

Another key for Lemonade IPO, though, is that there is a powerful foundation of AI (artificial intelligence). For example, when someone wants to purchase insurance, there is a two-minute chat with the AI Maya bot.

And for claims? Well, the customer can chat with the AI Jim bot. He can pay off claims within as little as three seconds!

The AI not only helps with customer interactions but also crunches the data to minimize the risks of fraud. What’s more, the technology powers the customer support functions as well as the marketing campaigns.

“Lemonade’s use of conversational AI to bind policies and manage claims proves that insurers don’t need to depend on thousands of agents in call centers to meet policyholders’ needs,” said Evan Kohn, who is the CBO at Pypestream. “Legacy insurers should take note of this modern approach to customer experience. Digital-first, cloud-native, always-on upstarts like Lemonade are writing a new playbook on how to capture the wallets and attention of younger demographics, and demonstrating that businesses can deploy AI and automation at scale in a manner that is hyper-personalized and creates effortless experiences for customers.”

Bottom Line on the Lemonade IPO

Lemonade has a different approach to the business model. Note that the company takes a fixed fee of 25% against premiums. In fact, excess premiums are typically donated to nonprofits, which are selected by customers.

The growth ramp has certainly been strong. From 2017 to 2019, revenues spiked from $2 million to $67 million. “The insurance industry is normally slow growth — usually about 3% to 3.5% of GDP — so their rapid growth will definitely be a positive for investors,” said Christopher J. Campbell, principal at Campbell Insurance, LLC. “Covid-19 concerns should increase the move to online insurance shopping, which could be a tailwind.”

As for the Lemonade IPO, the terms of the deal have not been set. But the company does plan to list on the New York Stock Exchange under the ticker of LMND and the lead underwriters include Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), Allen & Company and Barclays (NYSE:BCS).

Tom Taulli (@ttaulli) is an advisor and author of various books and online courses about technology, including Artificial Intelligence Basics, The Robotic Process Automation Handbook and Learn Python Super Fast. He is also the founder of WebIPO, which was one of the first platforms for public offerings during the 1990s. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2020/06/lemonade-ipo-its-all-about-ai-artificial-intelligence/.

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