Lemonade, established in 2016, is leaving its mark on the insurance industry by embracing the potential of artificial intelligence (AI) technology. After just reporting its 2023 first-quarter earnings and a stock surge of 27%, the effectiveness of AI to its business strategy is fully apparent. Although Lemonade’s stock has decreased 91% from its prior all-time high, that may not last for long.
Lemonade developed ChatGPT, an online AI chatbot that enables instantaneous responses to complex questions and the capability to write computer code. The company also engineered two AI-based assistants to simplify the insurance process – Maya, who can produce quotes in fewer than 90 seconds, and AI-Jim, which can autonomously pay out claims in just three seconds. More than one million customers are now reaping the benefits of Lemonade’s AI solutions and the number is still growing.
In the quest to price premiums accurately, Lemonade launched its AI-powered LTV6 model to forecast which customers may switch to a different insurer or have a higher-than-normal claim cost. Then, the company released upgrades and is currently transitioning to its 8th life time value (LTV8) model. Altogether, these AI algorithms have increased Lemonade’s in-force premium 56% year-over-year, it has decreased its gross loss ratio to 87%, and it expects to save meaningful cost through automation in the near-term.
The company has also lifted its full-year revenue forecast to $396 million from the previously estimated $379 million, based on the impressive 115% rise in revenue. As Lemonade continues to expand into new markets like car insurance and maximise its marketing spend, the AI model-driven decisions will continue to assist with its growth.
Additionally, Lemonade has stated its plans to reach profitability with the cash it currently possesses. While investors may initially doubt the company’s ability to make a mark in the heavily traditional insurance industry, the encouraging revenue results are promising.
Lemonade has embodied the potential of AI and its accomplishments thus far make it a great opportunity to benefit from the AI revolution. With the dip in Lemonade stock currently, investors may want to take the risk and pounce on these words of wisdom.
