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Here's Why I Think Lemonade Has 10X Potential

By Matt Frankel and Jason Hall – Oct 4, 2021 at 6:22AM

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The insurance disruptor isn't exactly a huge company now, but that could change in the not too distant future.

Insurance technology company Lemonade (LMND -1.39%) is still a relatively small insurance company, and its most exciting market opportunities may still be ahead of it. In this Fool Live video clip, recorded on Sept. 20, Fool.com contributors Matt Frankel, CFP, and Jason Hall discuss why they think Lemonade could be a 10-bagger for patient investors. 

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Matt Frankel: Lemonade is in the process of launching car insurance. Lemonade Car is the most promising product by far. The average renters insurance policies in the $15 range, the average car insurance policy is over $100 a month. They estimated that their current customers spend over $1 billion a month on auto insurance. That's pretty impressive if they can just convert 10% of them, that'd be a pretty big needle mover.

Jason Hall: Yeah, that's by itself you have a billion-dollar revenue business.

Frankel: Great. I'm pretty sure that that will be the most successful part of the business once it launches. The launch dates up in the air at this point. They are working through the regulatory issues right now, but they said their current customers have expressed "overwhelming support" for this product that they want this. Why not? I wouldn't even refile an auto claim. It's not fun. If Lemonade could it in 10 seconds. Like they say they can. That's a big incentive to switch. I really don't have that much incentive to switch from say, Geico to Progressive (PGR -1.37%) other than price if that were the case.

Hall: Entirely.

Frankel: But if there's a better process, a significantly better process, the claims are clunky even with say Geico, which is who I use which is a pretty tech focused insurer. But it's still a pretty clunky process. Then you get into life insurance which Lemonade also offers. Applying for life insurance is terrible. When I applied for life insurance and nurses to come over to my house and take blood, it's an invasive process. It takes forever their application from start to finish up like two weeks. Lemonade, you apply, it's done. It's just such a better way to do it. Historically bad experience.

Hall: Yes, absolutely. Again, to me, getting back to the reason that this is my second rated stock is, let's be honest, $4 billion is an insanely high valuation to pay for the business as it is today, but are not buying for it as the business it is today, you are buying it for the business, that it can be a five-to-10 plus years. Using all of those things, the technology, the change in the financial incentive alignment, this could be very disruptive and it can be multiple orders of magnitude bigger.

Matthew Frankel, CFP owns shares of Lemonade, Inc. The Motley Fool owns shares of and recommends Lemonade, Inc. The Motley Fool recommends Progressive. The Motley Fool has a disclosure policy.

Stocks Mentioned

Lemonade Stock Quote
Lemonade
LMND
$17.75 (-1.39%) $0.25
Progressive Stock Quote
Progressive
PGR
$129.38 (-1.37%) $-1.80

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