- Startup’s debut is unusually fast for insurance industry
- Sequoia Capital co-led $13 million financing last year
After raising last year’s largest round of seed funding, Lemonade Inc. plans to start offering insurance coverage in New York on Wednesday with the blessing of the state’s regulator. Lemonade will sell homeowners and renters insurance, promising customers the ability to submit claims within minutes on their mobile devices.
The startup’s rapid flight from inception to insurance sales in about a year is unusual in a traditionally slow-moving industry. Lemonade Chief Executive Officer Daniel Schreiber said he chose New York to introduce the service because he wanted to reach “the toughest jurisdiction first.”
“New York is regarded as a very demanding regulator,” he said. “You’ve got to crack the hard nut. If you manage to build a business model that passes muster with somebody as demanding as New York, then it can grow from there and hopefully grow fast.”
New York is one of the largest U.S. markets for property-casualty insurance, a category that also includes auto coverage. California is the biggest, with more than $65 billion in premiums written in 2014, according to the Insurance Information Institute, a trade group. Lemonade will compete with Allstate Corp., Liberty Mutual Insurance Co. and State Farm Mutual Automobile Insurance Co., the biggest homeowners insurers.
Insurers around the world have been pressured by competition and low interest rates. Schreiber saw an opportunity and started Lemonade last year after leaving Powermat Technologies Ltd., the Israeli wireless charging startup where he served as president. Powermat has struggled against intensifying competition, uncertainties about cordless technology, boardroom drama and the recent resignation of CEO Thorsten Heins, who previously oversaw BlackBerry Ltd.’s unsuccessful push into touchscreen phones.
With Lemonade, Schreiber found an ally in Sequoia Capital, which described the deal last year as one of the firm’s largest seed investments ever. Expectations are high. Sequoia said at the time that Lemonade “will transform the insurance landscape beyond recognition.” The $13 million financing round, the biggest seed deal of 2015, also included funds from Israeli venture capital firm Aleph, according to research firm CB Insights.
Schreiber is pitching the company as a peer-to-peer insurer, with a model that resembles one used by Social Finance Inc. for student loans. His startup has gotten the support of some well-known insurers. Warren Buffett’s Berkshire Hathaway Inc. and XL Group Plc have contracts with Lemonade to provide backstops for its coverage.