Lemonade says its first full year with all five insurance products in the market was a good one.
This, as the full stack, artificial intelligence (AI)-driven insurance company told investors on a Thursday (Feb. 23) fourth-quarter 2022 earnings call that its customers are increasing both their number of policies and premiums per policy over time.
As a result, the company has topped consensus revenue estimates each of the past four quarters, and beaten consensus earnings per share (EPS) analyst estimates during three of them including the most recent, as well as outperformed the market so far this year — with the next generation digital insurance provider’s share price up double digits for the year, compared to the S&P 500’s dismal returns which have failed to track even inflation.
The company’s stock is trading high today (Feb. 23) on its fourth quarter earnings news, up around 13% as of reporting.
The insurer’s secret sauce? It’s being “built for AI since day one,” Lemonade founder and CEO Daniel Schreiber told investors on the call.
“There’s no doubt these technologies are becoming incredibly powerful,” said Schreiber in response to an investor question about the impact he sees of the “third wave of AI exploding into common knowledge and the marketplace.”
Lemonade’s products are powered by artificial intelligence (AI) and leverage highly automated processes to transform much of what traditional insurance companies perform manually.
The company’s homegrown AI technology uses natural language processing (NLP) to parse large amounts of data, and both Lemonade’s sign-up process and claims management are handled by its proprietary AI chatbot, AI Jim.
“If you haven’t architected your company so that AI has access to deep information, it will be hard to glean the type of deep insights we’ve built our business upon,” Schreiber said. “Disparate, not entwined, data sets will be difficult for [third wave] AI to mine in a highly efficient way, and human interfaces of all kinds will make it hard for the solutions to get data sets.”
He added that because Lemonade was built on a technical foundation of AI and behavioral economics specifically designed to replace brokers and bureaucracy with bots and machine learning solutions that aim for zero paperwork and instant everything, the company “will be able to leverage these [AI] abilities [in the market] as they mature in a way that will be unmatched by competition.”
The more customers Lemonade onboards, the greater real-world data its user audience provides the company’s proprietary AI systems with to train themselves on.
The company is growing fast and acquiring young customers, per executives on the earnings call.
Total customers were up 27% year over year (YoY) to 1,807,548, nearly double from around one million in 2020.
As a result, the company indicated that its underwriting and risk management policies should only become increasingly accurate and more profitable over time. Already, executives noted a 30% increase in premium per customer and highlighted the continued shift of Lemonade’s business mix toward products with higher average policy values.
Saying, “98% of claims begin with a conversation with AI Jim, the first port of call for customers will be talking with this AI through the app,” Schreiber asserted, “There are claims that AI Jim can handle start to finish, 40-something-percent where there is no need for any human intervention at all.”
Customers who turn to Lemonade’s AI Jim chatbot to submit and handle their claims across renters, homeowners, car, pet and life insurance products trigger a specialized AI module that specializes in pulling from contextual data to analyze risks, damage, repair costs, and other relevant information to the submitted claim.
Lemonade is currently ranked within the Top 10 of PYMNTS’ exclusive “Insurance Provider Rankings” list, sitting at number eight with a score of 70 out of a possible 100.
As reported by PYMNTS, the digital-first insurer recently (Feb. 14) teamed up with BNP Paribas Cardif to offer digital renters’ insurance in France.
PYMNTS research has found that insurance companies and InsurTechs around the world are exploring how to use digital solutions to improve nearly all aspects of the insurance process, with 34% of European insurance firms interested in boosting their digital payments capabilities.