Insurance technology company Lemonade (LMND 1.20%) reached 1 million customers after just over four years in business, and it did so in a fraction of the time it took some of the largest insurers in the business to reach the same milestone. In this Fool Live video clip, recorded on Nov. 29, Fool.com contributor Matt Frankel sits down with Lemonade's co-CEO and co-founder Daniel Schreiber to find out what made Lemonade such a fast success.
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Matt Frankel: Is that why you started with renter's insurance? It's one of the things that's always been on my mind, is it because it's kind of a lower price point, is it because it was targeting the millennial generation that's already tech savvy, or is it all of the above?
Daniel Schreiber: A central plank of our strategy is to target consumers when they are first time buyers of insurance. If you've watched TV for more than five minutes in the last month, you were hit with a TV commercial that said switch and save, and that really is the central plan for strategy of all the insurance companies in all different forms. First 15 minutes save 15% or Liberty Mutual, and all of those guys. We're playing a different sport. We're not trying to take customers from other people, we're trying to attract first-time buyers of insurance, and about 90% of our customers are first-time buyers of insurance and renters tends to be the on-ramp into the world of insurance.
That is really the best way to attract young consumers, first-time buyers, and then as they go through life cycle events, they move from renting to that condo, to the homeowner suburbs, they buy a car, they have kids, they want life insurance, all of those things the acquire part's. All those things really mean that they're spending on premium is likely to 10x and 10x again over their subsequent years. Get them young, delight them, and they'll stay with you for life is really our strategy.
Frankel: Is that how you got to 1 million customers in a fraction of the time of anybody else? I have to think that the low price point has something to do with it. But is it kind of that you're getting these customers when they're first entering the insurance market?
Schreiber: Yeah, absolutely. I think the thing that attracts consumers to Lemonade is a cocktail made up of value that you just spoke about, values and experience. If you take those apart on value, rental insurance really allows first-time buyers of insurance to save roughly 50%, not 15%, 50%. You can see dramatic savings by buying Lemonade as opposed to someone else, and that's because it's all digital, no brokers, no middleman, and there's just a lot of collapsing over costs, not at the expense of the experience, but to the delight of their customers. That's the second plank because you end up buying insurance in 90 seconds, getting paid in three, doing it from the comfort of your pajamas.
You're hitting the value, you're hitting the experience, and then the values piece, the distrust of insurance companies is deeply rooted in the sense that you are in a zero-sum conflict with your insurance company, they make money by denying your claims. We worked with really world-leading behavioral economists in the early days to try and restructure insurance so that it wouldn't have that and changing a two-player bilateral conflicted game into a trilateral gain by bringing nonprofits into the room and saying that underwriting profits will go to non-profits. That weaving in social impact into the base product is of great attraction, I think to all consumers, but to younger consumers disproportionately.