Case
Teaching Notes
Abstract
The case discusses how Lemonade Inc., an insurtech startup, captured value for Millennials by lowering insurance premium requirements by almost 50% compared with that charged by large insurance companies, also processing claims within a few minutes. Lemonade especially utilized artificial intelligence and behavioral economics such that their business practice has zero paperwork and instantly approves insurance policies and claim reimbursements. However, by 2020 Lemonade had less than 0.1% of the home and renters insurance market in the United States, which was led by large insurance companies such as State Farm and Allstate. Lemonade’s database also had a relatively small number of customers, which adversely influenced the preciseness of data required for behavioral analytics. If companies such as State Farm, with much larger databases, digitize their insurance products, Lemonade’s challenges will become further aggravated. What can Lemonade CEO Daniel Schreiber use as competitive advantage against large traditional insurance companies? What should he do to improve the working of Lemonade’s data analytics?
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