Lemonade CEO chats with Cheddar News about the launch of environmentally-conscious car insurance

Good morning, great to be with you. And an exciting day for our company. Lemonade IPO'd a mere 16 months ago, and at that time we were only doing homeowners insurance. In the intervening months, we've launched pet health insurance and life insurance, and now car insurance. We've really rounded out the offering so that all of our customers' needs can be met by Lemonade in one place, with an app that delivers instantaneous policy coverage. It takes a few seconds to get covered, and as little as three seconds to get paid. Bringing that kind of delightful, instantaneous, tech-driven capabilities into insurance, into the car market, made so much sense. And marrying that with the social impact of being a B Corp and a public benefit corporation, and thinking about how to do insurance in an environmentally responsible way, all of that just seems very much in lockstep with the times. We've seen huge pent-up demand that we're happy to begin to meet.

Yeah, and not just to them. Frankly, this starts a few years ago where Lemonade took the stance that we will never invest in coal or in other polluting industries. While that may sound like an obvious thing for an insurance company to do, we're the only American company doing it. In fact, the insurance industry in America invests over half a trillion dollars in polluting industries. It's the second largest investor in that sector, which is kind of staggering when you think about the fact that those very ills caused by pollution and climate change—floods, wildfires, and health hazards—are the things that we're insuring against. So we take premiums to protect you from things, and we invest them in the very things that cause those ills. We found that to be intolerable. So it begins there, but with car we've added a lot more. Yes, special rates for electric vehicles and hybrids. We also give you coverage so that if you run out of charge on the road, we'll give you emergency services to recharge. We'll cover your at-home charger. We will also give you lower rates if you drive less. But most interestingly, I think we use all of our technology to track how you're driving so we can give you those rates, but also to calculate your carbon footprint. We actually, in real time, track what kind of emissions you have, and each year we will plant trees commensurate with those emissions, such that over the life of those trees we expect it more or less to offset the carbon emissions that we emit during our driving. So while we can't stop driving altogether, we think this kind of policy, this kind of product, takes us a step closer to where we all want to get.

It's a formidable task, no question. We're up against very serious competitors. You mentioned Geico, Progressive, and alike. They are very serious companies, so I don't mean to in any way downplay the enormity of the challenge that we face. That said, Google Trends shows that customers are searching for Lemonade car with the same frequency that they've been searching for Lemonade home, even though for five years we've been offering home and we've only been offering car for one day. So we see a tremendous amount of pent-up demand. But I think it goes deeper than that. Incumbents who have been doing this for decades, who have tens of billions of dollars to protect, are actually leery of adopting the kind of technologies that form the foundation of our product. What I mean by that is we use all the sensors in your phone—the gyroscope, the magnetometer, the GPS, and the accelerometer—to detect when you're driving and how much you're driving. That allows us to really differentiate between people who drive poorly or who drive a lot, and the vast majority of us who drive less than average and who drive responsibly. Incumbents can't do that. So what they do is they bundle everybody together and charge what makes sense as an average rate, but that really means they're penalizing about two-thirds of their customers in order to subsidize the worst third. And they're leery of adopting this technology because if they had that kind of visibility, they would have to lower rates by about 30 or 40 percent for most of their customers and raise rates for others. All of that would do tremendous violence to their book of business, so they've been slow to adopt. In fact, Warren Buffett, speaking at the Berkshire annual general meeting, called out his own company Geico and said that they've entirely missed the bus. But now you understand why. That means that companies like ours, using these technologies to the full, passing on all of those benefits because we have no legacy business to protect, gives us a tremendous edge in a very competitive market.

Absolutely. So Illinois is the first state. This is a state-by-state regulatory process. We've already said that Tennessee will be next, and we'll launch as quickly as we can. And absolutely, Baker, thank you for your business with renters and pets. The short answer is yes, you can bundle, and you'll save considerably. We already, yesterday, our first day of sales, saw multiple people coming in with triple bundles, which hopefully you'll be able to avail yourself of as well and save a great deal in the process.