Lemonade said his first full year with all five insurance products on the market was a good year.
This, as a full stack, artificial intelligence (AI)-driven insurance company told investors on Thursday (Feb. 23) its fourth-quarter 2022 earnings call that its customers are increasing their policy amounts and per-policy premiums over time.
As a result, the company has exceeded consensus earnings forecasts for each of the last four quarters, and beat consensus analyst earnings per share (EPS) estimates for three of them including the most recent, as well as outperformed the market so far this year — pricing in the next-generation digital insurance provider’s stock. up double digits for the year, compared to a dismal S&P 500 that failed to even track inflation.
The company’s stock is trading higher today (Feb 23) on news of its fourth quarter earnings, up about 13% at reporting time.
The insurance company’s secret sauce? It is being “built for AI from day one,” Lemonade founder and CEO Daniel Schreiber told investors over the phone.
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“There’s no doubt this technology is going to be incredibly powerful,” Schreiber said in response to investor inquiries about the impact he’s seeing of “the exploding third wave of AI into common knowledge and the marketplace.”
Lemonade products are powered by artificial intelligence (AI) and leverage highly automated processes to change many things that traditional insurers do manually.
The company’s on-premises AI technology uses natural language processing (NLP) to parse large amounts of data, and Lemonade’s claim registration and management process is handled by its proprietary AI chatbot, AI Jim.
“If you haven’t designed your company so that AI has access to deep information, it will be difficult to gather the kinds of deep insights that we have used to build our business,” says Schreiber. “Different, not intertwined, data sets will be difficult to do [third wave] AI for mining in a very efficient way, and all kinds of human interfaces will make it difficult for solutions to get data sets.”
He adds that because Lemonade is 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, companies “will be able to take advantage of this. [AI] ability [in the market] as they ripen in a way unmatched by the competition.
No Need for Human Intervention at All
The more customers that join Lemonade, the more real-world data its audience of users feeds to the company’s AI systems to train themselves on.
The company is growing rapidly and acquiring young customers, per executives on a revenue call.
Total subscribers rose 27% year over year (YoY) to 1,807,548, almost doubling from around one million in 2020.
As a result, the company indicated that its underwriting and risk management policies would become more accurate and more profitable over time. Already, executives noted a 30% increase in premiums per customer and highlighted the continued shift of Lemonade’s business mix towards products with higher average policy values.
Saying, “98% of claims start with a conversation with AI Jim, where the first call for the customer will be talking to this AI through the app,” Schreiber confirmed, “There are claims that AI Jim can handle from start to finish, 40-something-percent where no human intervention is required at all.”
Customers who turn to the AI Jim chatbot Lemonade to file and handle their claims across renter, homeowner, auto, pet, and life insurance products trigger a dedicated AI module that specializes in pulling from contextual data to analyze risk, damage, repair costs, and other relevant matters. information on claims submitted.
Lemonade is currently ranked in the Top 10 of PYMNTS’ exclusive “Insurance Provider Ratings” list, sitting at number eight with a score of 70 out of 100.
As reported by PYMNTS, the digital first insurance company recently (14 February) teamed up with BNP Paribas Cardif to offer digital renters insurance in France.
PYMNTS research found that insurers and InsurTechs around the world are exploring ways to use digital solutions to improve almost all aspects of the insurance process, with 34% of European insurers interested in enhancing their digital payment capabilities.
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