According to Lemonade, the first full year with all five insurance products on the market was a good one.
This, as the artificial intelligence (AI)-powered full-stack insurance company told investors on Thursday (February 23) during a conference call on the fourth quarter of 2022, that over time its customers will see both the number of policies and the premiums increase per policy.
As a result, the company has beaten consensus estimates for revenue in each of the last four quarters and beat analyst consensus estimates for earnings per share (EPS) in three of them, including the most recent, and has outperformed the market so far this year — with the stock price of the next-gen digital insurance provider is up double-digits for the year compared to the dismal returns of the S&P 500, which have not even been able to track inflation.
Shares of the company are trading high today (February 23) following fourth quarter earnings reports, up around 13% at the time of writing.
The insurer’s secret sauce? It’s been “built for AI since day one,” Lemonade founder and CEO Daniel Schreiber told investors on the earnings call.
Read more: Why the whole world is bullish on generative AI
“There is no doubt that these technologies will become incredibly powerful,” said Schreiber in response to a question from an investor about the impact he sees of the “third wave of AI entering common knowledge and the market.”
Lemonade’s products are powered by artificial intelligence (AI) and leverage highly automated processes to transform much of what traditional insurance companies do manually.
The company’s proprietary AI technology uses Natural Language Processing (NLP) to parse large amounts of data, and both Lemonade’s sign-up process and claims management are handled by its proprietary AI chatbot, AI Jim.
“Unless you architected your business to allow AI access to deep information, it’s going to be difficult to get the kind of deep insights that we’ve built our business on,” said Schreiber. “Different, uninterrelated datasets will be difficult [third wave] AI for high-efficiency mining and human interfaces of all kinds will make it difficult for the solutions to obtain datasets.”
He added that the company “will be able to leverage these benefits because Lemonade is built on a technical foundation of AI and behavioral economics, specifically designed to replace brokers and bureaucracy with bots and machine learning solutions.” , aiming for zero paperwork and instant everything [AI] capabilities [in the market] while maturing in ways unmatched by the competition.”
No need for human intervention at all
The more customers Lemonade has on board, the more real-world data the user audience is making available to the company’s proprietary AI systems to train themselves on.
The company is growing fast and winning young customers, executives said at the earnings call.
Total customers grew 27% year-on-year (YoY) to 1,807,548, almost doubling from around one million in 2020.
As a result, the company indicated that its underwriting and risk management policies should become increasingly accurate and profitable over time. Already noting a 30% premium increase per customer, executives highlighted Lemonade’s continued shift in business mix towards products with higher average policy values.
Saying, “98% of the claims start with a conversation with AI Jim, the first point of contact for customers will be the conversation with this AI through the app,” Schreiber claimed, “There are claims that AI Jim was in his early to late 40s can handle -some percent where no human intervention is required at all.”
Customers who contact Lemonade’s AI Jim chatbot to submit and process their claims for renter, homeowner, auto, pet and life insurance products trigger a special AI engine that specializes in deriving risks from contextual data , damage, repair costs and other relevant data to analyze information on the submitted claim.
Lemonade is currently in the top 10 of PYMNTS’ exclusive Insurance Provider Rankings list, ranking eighth with a score of 70 out of a possible 100.
As reported by PYMNTS, the digital-first insurer recently (February 14) partnered with BNP Paribas Cardif to offer digital renters insurance in France.
Research by PYMNTS found that insurance companies and InsurTechs around the world are investigating how digital solutions can be used to improve almost every aspect of the insurance process, with 34% of European insurance companies interested in improving their digital payment capabilities.
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