Lemonade Insurance (Facebook)
Lemonade, an Israeli insurance company powered by AI and social impact, has received a $150 million infusion from General Catalyst, a leading venture firm and an early investor in Lemonade, to create Synthetic Agents. Lemonade says that synthetic agents are a “novel financial structure that unlocks growth without depleting cash.”
Synthetic Agents were designed to deliver the cash flow benefits of independent agents, but without forfeiting the customer relationship, and without ceding much of the gross profit for the lifetime of the customer. Lemonade said that this is needed to end the problem of cash flow gaps caused by the long time it takes for its share of the fees paid by insurance customers to the agents to find their way back to the company. These payments, lemonade said, can take up to three years to get made.
Unfortunately, the agents tend to use third parties in processing these fees, cutting into the amounts that Lemonade would receive. Synthetic agents, Lemonade hopes, will not just speed up the payment process, but also save on third party fees.
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Under the program, which commenced on July 1, 2023, General Catalyst (through its Customer Value platform) will finance up to 80% of all Lemonade’s CAC, and in return will receive a synthetic ‘commission’ of up to 16% of the stream of premiums they helped finance. Once GC has recovered their investment and capped return on any one cohort, the remaining ‘lifetime value’ of the customers from that cohort accrues to Lemonade, entirely and forever.
Founded in 2015 by COO Shai Wininger and CEO Daniel Schreiber, Lemonade is a licensed insurance carrier offering renters, homeowners, and pet health insurance in the United States, and contents and liability insurance in Germany and the Netherlands. It is powered by artificial intelligence and behavioral economics and driven by social good. A certified B-Corp, Lemonade donates unused premiums to nonprofits selected by its community as part of its annual Giveback program. It only recently expanded into the area of pet insurance. It is also expanding into life insurance.
The company broke the one million customer mark at the end of 2020. Lemonade first went public on the NYSE in July 2020, raising $319 million in the IPO.
“We think the Synthetic Agents program is something of a game changer for Lemonade,” said Daniel Schreiber, Lemonade co-CEO and co-founder. “Thanks to Synthetic Agents, we believe we will be able to accelerate growth without drawing down our capital reserves or selling more equity. That means generating a significantly larger business, sooner, with more cash in the bank, and with a materially higher return on capital.”
