Everywhere you look these digital days, clever techni-preneurs are attempting to harness the Internet and social media to launch peer-to-peer (P2P) alternatives to traditional economic models, whether through online marketplaces such as eBay, car sharing services such as Uber or vacation rental portals such as Airbnb.
Enter Lemonade, the first U.S.-based startup to propose a sharing economy alternative to traditional home insurance.
New York-based cofounders Daniel Schreiber and Shai Wininger vow to reinvent insurance “in ways not available to the legacy insurance carriers,” with the goal of making insurance a “delightful” experience for consumers. The name reflects the pair’s goal of turning shopping for insurance, which consumers consider a lemon, into, well, lemonade.
So far, they’ve raised $13 million in initial funding.
Taking on a ‘necessary evil’
While the aspiring P2P insurers aren’t talking details yet, Schreiber tells Insurance Journal they hope to launch Lemonade within a few months, focusing strictly on consumers rather than businesses initially.
Schreiber says Lemonade has recruited seasoned insurance actuaries and professionals, including a few big names in the industry, to flesh out how P2P property and casualty insurance would work. But unlike Uber and other car-sharing rebels, the Lemonade makers are already working with New York regulators and plan to launch as a fully approved and licensed insurance carrier, not a broker.
These enterprising Davids insist that Lemonade “harkens back to the origins” of insurance, before, they say, it became a modern-day Goliath: the opaque, bloated, bureaucratic monolith with which the public has grown weary.
“Most Americans view insurance as a necessary evil rather than a social good, and that’s something we’d like to change,” Schreiber said in Lemonade’s money-raising pitch. “We’re challenging the way insurance companies work, with a peer-to-peer business model fueled by self-serve technology.”
Already being tried elsewhere
Lemonade isn’t the first tech startup to take a shot at the insurance Goliath. Germany has friendsurance, the United Kingdom has Guevara and China has TongJuBao.
With the typical P2P insurance model, small groups of policyholders pay premiums into a claims pool. If there’s money left in the pool at the end of the policy period, members get a refund. Getting that simple model started requires a considerable amount of initial funding however.
Haim Sadger, a partner in Sequoia Capital, says backing this Lemonade stand was a no-brainer.
“It is very unusual for a company to receive $13 million in an initial round of funding, but it is rarer still to find such accomplished founders tackling such a sizable industry with such a compelling solution,” he said in a news release. “We’re betting Lemonade will transform the insurance landscape beyond recognition.”
He may be right. Previous Sequoia-backed startups include Apple, Google, LinkedIn, Trulia – and yes, Airbnb.
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