One of the most profitable and complex industries is insurance but there is plenty of innovation happening. The most well known of these is Lemonade, which is focusing on reducing premiums, donating to charity and increasing transparency. Oh and it also uses artificial intelligence.
It makes money by keeping 20% of all premiums and sets aside 40% for insuring itself against major claims with the remaining 40% covering claims.
Unlike traditional insurance companies, any money not used for claims then goes to a charity of a customer’s choice. It has captured the imagination of consumers though still small and only available in a few states in the USA. After the first year though, it delivered $53,174 or 10.2 percent of first year revenues
Where does it use AI? In chatbots, using them to automate customer interactions, though not many actually complete without human intervention. It is a mobile first company so its primary interface is through its mobile app though it does have a website.
If it succeeds in getting the chatbots to take over a large percentage of customer interaction, the company would be attractive to existing insurance companies regardless of the success of its business model. Of course, the insurance companies may want to try and buy the company and shut it down if it becomes too successful and undermines their very profitable current model.
The model is inspiring other insurance startups to adopt a similar approach. A new yet to launch pet insurance company in the UK is looking to follow a similar model and I would be very surprised if there weren’t others.