Israel-born, U.S.-based Digital Insurer Lemonade Eyeing Return Home

Digital insurer has made a big splash in the U.S., but Israeli founder has so far shunned the local market

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Assa Sasson
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The Lemonade app, December 18, 2017
The Lemonade app, December 18, 2017Credit: Ofer Vaknin
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Assa Sasson

Lemonade, the American digital property insurance startup founded by Israelis Shai Wininger and Daniel Schreiber, met with Israeli Finance Minister Moshe Kahlon to discuss the possibility of the company seeking a local insurance license, TheMarker has learned.

Lemonade entering the Israeli market would almost certainly shake up the local industry, which uses independent agents to sell and service policies. Lemonade offers low-cost homeowners' and rental insurance via an app that gives users a quote on the spot.

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Lemonade and the Finance Ministry declined to comment on the meeting.

The app uses a peer-to-peer system to pool money that is used if and when a claim needs to be made. The model used by Lemonade and other online providers has captured half the policies taken out by first-time buyers of home insurance in the United States.

Lemonade was reportedly readying an initial public offering on Wall Street at a $2 billion company valuation but delayed it after the abortive WeWork IPO left a sour taste in the mouths of investors.

Israel’s Finance Ministry has sought to convince Lemonade to enter the Israeli market for several years. But the venture capital-backed company has shown little interest, choosing to focus instead on bigger, faster-growing markets.

In addition, the company’s system for fixing rates relies on the kind of databases that don’t exist in Israel. As Lemonade has explained in the past, to obtain the data it needs on a specific building, it would have to send an employee to the relevant government office and copy the documents, while in the United States, they are available digitally.

“In the U.S., I can look up a particular address and it tells me the last time a pipe was replaced,” Wininger told TheMarker in a 2017 interview. “I spoke with [now former Capital Markets Commission Dorit] Salinger. I want to be part of a committee that will devise policies regarding data so that there’s the technology that would enable us to come here.”

Lemonade uses bots and artificial intelligence to price policies as well as to service policyholders online. Small claims are processed in a few minutes without human intervention.

The company’s business model is also different from what is typically used in the insurance industry. Instead of earning a profit from the difference between money coming in as insurance premiums and going out as claims paid to clients – a model that discourages insurers from paying claims – Lemonade takes a 25% of all premium revenues. The rest is used for paying claims or is donated to charities chosen by clients.

Lemonade founders Shai Wininger and Daniel SchreiberCredit: Ofer Vaknin

One of the problems facing insurance companies is small-scale fraud: For instance, in a house break-in where thieves make off with an old laptop, a 26-inch television set and jewelry, the policyholder might report the loss of two laptops, a 40-inch TV, jewelry and a camera. In many cases, the exaggerated claim is done with the knowledge that the insurers won’t fully cover the actual losses. Lemonade’s policy is designed to discourage this phenomenon.

Since it was formed in 2015, Lemonade has raised $480 million in capital. The last round was in April 2019 for $300 million, led by Japan’s Softbank at a valuation of $2 billion after the money. Other investors in the company include the venture arms of Google and the German insurer Allianz.

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