Will Lemonade feel the ripple effects of COVID-19?

Lemonade CEO discusses navigating the coronavirus pandemic during the company's growth stage

Insurtech Lemonade had its initial public offering in July — with the COVID-19 pandemic in full swing and the U.S. in a recession.

Lemonade is a New York-based insurance carrier that uses artificial intelligence and behavioral economics to offer renters, homeowners and pet health insurance.

A significant portion of Lemonade’s customer base is millennials, many of whom are moving back home with their parents as a result of the pandemic, Catrin Shi, Insurance Insider managing editor, pointed out at CB Insights’ Future of Fintech event. How will this trend ultimately impact Lemonade?

In response, Lemonade CEO & co-founder Daniel Schreiber said the trend “may impact us, [but] I’m hopeful that that won’t be the case.”

“The P&C market in Europe and in the US is large enough, and our opportunity and our headroom is so massive that I’m not overly concerned by the kinds of a few months or even a year or two of recession in terms of how it would affect our business directly,” he said. “At least, so far we haven’t seen that materialize.”

Recently, Lemonade reported a decline in revenue to $17.8 million in its third quarter earnings report, down from the $19 million it reported a year ago, reported. The insurtech company said the decline in revenue was partly due to an accounting change in its third quarter earnings. Lemonade also reported a net loss of $30.9 million which was an improvement from the net loss of $31.1 million for the same quarter last year.

Lemonade’s first-year customer retention rate is about 75 percent, and Schreiber said that the company is able to attract “consumers as they’re stepping onto the conveyor belt of life.”

However, the big question is whether the company will be able to retain consumers throughout their lives. Schreiber said that the data so far suggests that the company can achieve this goal.

For instance, Lemonade’s third quarter earnings showed that the in force premium generated by Lemonade renters “graduating” to become Lemonade homeowners grew by over 300 percent in the third quarter this year compared to the same period last year.

“The data is encouraging, but it’s a bet that we still have to do more — there’s a lot more to do in order to really grow into that strategy,” he said.

Going forward the company is also expanding its presence by offering insurance services in France and also plans to test a life insurance product within 90 days, reported. Lemonade will be launching in France without having any employees there, a factor that makes the expansion more feasible, Schreiber said.

“Borders matter less in a digital and shrinking world,” he said.

Lemonade was trading at $65.26 per share as of close of business Tuesday. The company had priced its initial public offering at $29 a share. It ended up soaring nearly 140% to close that day at $69 per share – slightly higher than it’s trading now.

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