In 2015, Daniel Schreiber, had already had one start-up – in the internet security business – that failed.

He returned to his day job in senior marketing management for a tech company, but was looking around for a big idea to launch another start-up. Schreiber decided that the insurance business was ripe for tech disruption because “every person in the nation needs insurance and yet many distrust traditional insurers,” (ref Forbes).  In consulting with a venture capitalist on the prospects, he was introduced to Shai Wininger, a coding and design whiz who had already co-founded four businesses.  When invited to co-found Schreiber’s new business, Winninger quickly agreed, saying, “When you’re an entrepreneur and you find something like that, it’s a once-in-a-lifetime opportunity that you have to go after.”  The pair began their work by developing a profile of what an ideal insurer would look like, from a Millennial’s point of view.  It would be on-line only (no paper and no insurance brokers), it would be low-cost, easy to deal with, and “trustworthy.”  To learn more about the insurance industry, they recruited an industry veteran, Ty Sagalow, and together the three determined that rather than sell policies backed by established insurers, the new company would become a licensed carrier itself, retaining claim liability on its own balance sheet.  That meant that they could pay claims faster and operate under the unique business model that has become the pillar of their marketing.  The company takes 25% of insurance premium revenue for administrative costs and potential revenue.  The remaining 75% is used to fund customer claims, buy reinsurance and pay taxes and fees, with anything left going to charities that customers choose.  Thus, their social-compact pitch is that the company can’t profit from denying legitimate claims and customers making bogus claims are cheating charity, not some greedy insurer.   Using artificial intelligence, a mobile app and other tech methods, the company, Lemonade, was founded and is currently turning the centuries-old business of property insurance into a Millennial-friendly consumer product.  In 2018, its second full year of offering renters and homeowners insurance, Lemonade took in $57 million in premium revenue from 425,000 customers, 75% of them under 35 and 90% buying this kind of insurance for the first time.  Lemonade currently operates in 22 states, with 170 employees, and plans to double revenue this year and expand to all 50 states and Europe.  So far, Lemonade is only a bit player in the insurance business, with 0.1% share of the homeowners and renters market, compared with 19% for State Farm and 10% for Allstate,  But the biggies have taken note, with State Farm releasing an ad spoofing “budget insurance bots” and claiming that they can”t compete with human agents.  Schreiber’s response is: “This is 2019 – you don’t produce ads mocking the power of technology.”   . . . Continuing to turn lemons into Lemonade.

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