Lots of investors are talking about upstart insurance technology stock Lemonade (NYSE:LMND). Its digital approach is creating a great experience for customers and providing coverage for less cost. But the company still has a pretty concentrated business and had significant exposure to the Texas freeze earlier in the year. On a Fool Live episode recorded on June 30, Fool contributors Brian Stoffel and Brian Withers discuss a recent interview with the CFO and how the company is dealing with this multimillion-dollar catastrophe.

Brian Withers: Moving on to an even smaller company, Lemonade, LMND. Timothy Bixby, Lemonade's CFO was recently interviewed at Morgan Stanley Analyst Conference. I love reading these analyst conference stuff. You get a little bit of insight, off the normal conference call, quarterly conference call cadence. Bixby gave investors some idea about the size of the market that Lemonade is chasing.

First some background. Lemonade is disrupting the insurance business with a tech-first approach. If you go to their website, it says, "instant everything, incredible prices, and big heart." It's technology that allows lower costs, superior customer service and the heart piece? Well, if there's money left over at the end of the year when claims have been paid, they go to your favorite charity. Not a bad deal.

Bixby described what he called the upside-down pyramid, starting with renter's insurance at the bottom of policies where they started their business, where they could collect around $60 a year. Well, you know what? They're now into homeowners insurance, which is a $100 billion market, and some policies can be up to $6,000 a year. Life insurance, $200 billion. What about auto? Three hundred billion.

Here's another perspective, on their entrance into auto insurance. Two-thirds of their 1.1 million customers have access to at least one car. These are loyal happy customers that I bet would be willing to give auto insurance [from Lemonade] a try. Today they are in "most" of the United States, looking at -- they're only in 23 states for homeowners insurance. They still have room to grow across the United States. Just three countries in Europe: Netherlands, Germany, and France for only renters and liability.

Hundred and fifty million households in the U.S., double that in Europe. It's only got 1.1 million customers today. Given that, this insurance upstart has plenty of room to run.

Brian Stoffel: I love that approach. Start with the stuff that the only thing a 20-something [year old] is going to get and then slowly build your way up from there. I think that does make for a really compelling long-term thesis. But my question is how the company is doing right now, because I know that Texas is one of those 23 states that they're in and a huge portion of their portfolio, we'll call it, is in Texas. The state also lost power for a long period of time. I heard about how they almost lost power for months if they didn't make some moves at the right time when that deep freeze happened.

My question is, what effect did that have on Lemonade and what do we learn about the company in general moving forward based on how they dealt with it?

Withers: Lemonade's management told the story in the last earnings call and said that for the Texas freeze, they received about a year's worth of claims in the first few days, representing about $20 million of losses. After the event, they pitched this as a "we're doing well" perspective. We were able to get this catastrophe, we were able to fully resolve most all customer claims within a week, and we had a high net promoter score. Net promoter score is, would you recommend Lemonade to a friend? Management is pitching this as "even in a catastrophe, we can do really well." Do you take management's word for it? No, I think we do our own research.

I just poked around a little bit. Money.com rated Lemonade as one of the best online home insurance companies. Clearsurance that has over 2,200 reviews has Lemonade at a 90.6 [percent] give it the highest ranking of excellent, with only 2.3 with the lowest rating. Money Under 30 gave it to nine out of 10, NerdWallet gives it four out of five stars.

What I'm watching is the customer growth and retention numbers. Last quarter, customers grew 10% sequentially and 50% year over year. Annual dollar retention was at a new metric that they just started this past quarter, was 81%. That doesn't sound great with SaaS companies exceeding 100%, but it was up from 70% the year before showing me that it's getting better at retaining customers over time.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.