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Lemonade's lack of legacy pressure will be advantage in auto market, CFO says


Flat pricing and margins in the auto insurance industry this year due to an influx of drivers could benefit younger companies with less legacy pressure, Lemonade CFO Timothy Bixby has said.

Following Lemonade’s April announcement detailing an entrance into the auto market in the coming months, he said: “There are a number of dynamics that are changing in the auto sector. Some are accelerating. Some are new, some are pandemic driven.

“These more rapid disruptions or these dislocations or these innovations, depending on how you term them, help companies that look like us – companies that are more agile and have less legacy pressure, that are able to move more quickly.”

The CFO spoke at Morgan Stanley’s Sustainable Futures Conference, where he discussed Lemonade’s move into the $300bn auto insurance market, adding to the InsurTech start-up’s current life, health, renters, homeowners and pet health offerings.

Bixby said around two-thirds of Lemonade’s customers owned at least one car and that he hoped the product, Lemonade Car, would be an incentive for them to bundle auto insurance with other policies, such as health or life insurance.

“There's a lot to be learned, and there are strong players in this market who’ve done amazing things with technology, with direct-to-consumer engagement, sign-up and rating of policies, and we get that,” he said.

“But we'll be able to combine that with some of the new technologies being developed, telematics, greater, deeper data about customer behavior, how they drive and where they drive and their true actual risk, and we think the combination of those is really energizing for us, and we're looking forward to getting in the auto market, learning what we can learn and adapting quickly.”

Lemonade will be taking the underwriting risk by building pricing themselves instead of acting as a broker.

Although it has not announced a launch date, Bixby said their largest team to date – from a product and design perspective – was working tirelessly.

“To write policies on our own paper, we’re able to control the entire process from start to finish – the claims process, the custom support, interaction, all of those touch points that really create a strong customer experience.”

Bixby said younger companies such as Lemonade, launched in 2015 by way of investor seed money, had the benefit of a broader playing field and the flexibility to launch new products and make interesting choices.

“One thing about Lemonade that has been striking to me, especially as a newcomer to insurance, is how in line we are performing today with how we thought we might be three or four years ago,” he said.

“By the time we launch car, I think we’ll have launched four new products in less than two years. With the launch of car, we’re going to be bringing all the major coverage types to our customers.”

Bixby said the company would continue to innovate and that there was no shortage of types of insurance it could add, citing travel as an example.

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