Discuss timing. Final week, Lemonade revealed Lemonade Automotive, its entry into auto insurance coverage. This week, it introduced the acquisition of Metromile, one of many largest usage-based auto insurers on this planet. Insurance coverage know-how (insurtech) M&A has been sturdy, however admittedly, I didn’t anticipate to see a transaction like this so quickly. However I suppose I shouldn’t be shocked. In any case, Lemonade is a extremely formidable digital insurer. Inside six years, it has gone from a startup to a world, publicly traded model with a market cap of almost $4 billion. Its product enlargement has been as meteoric as its rise inside the trade. Whether or not you have been shocked by the announcement or not, that is huge information for all of us.
- Providing complete insurance coverage is a superb technique. I imagine the way forward for insurance coverage will likely be resolution targeted. Positive, corporations that promote restricted services and products will thrive. However corporations that promote complete packages will dominate markets and maximize their working leverage. Customers need ease and the power to “one-stop store” for insurance coverage. Our survey information reveals that the highest three causes prospects purchase further merchandise from their auto insurers are cheaper charges, simpler multipolicy administration, and belief within the supplier. Insurers that present complete options can leverage deep buyer relationships to scale back shopping for frictions and develop margins (partially via decrease common buyer acquisition prices). Lemonade understands this chance because it underpins its progress strategy and its curiosity in Metromile.
- Insurance coverage market progress is multifaceted. From the beginning, natural progress was Lemonade’s logical focus. The corporate developed and provided renters insurance coverage and, shortly thereafter, pet insurance coverage. Early this yr, Lemonade started promoting life insurance coverage via Bestow’s API, utilizing a partnership (embedded insurance coverage) strategy to spur progress. Now it’s buying Metromile so as to add to its multifaceted progress mannequin, gaining scale within the enterprise whereas assembly the wants of the shopper. Lemonade’s concentrate on Millennial prospects is wise, and its technique to supply complete, inexpensive options beneath one umbrella will profit the shopper expertise.
- Vertical integration and digital integration are converging. Each Metromile and Lemonade have vertically built-in working fashions. They each underwrite their coverages, develop their very own merchandise, use their very own software program, and depend on first-party information to handle their companies. As insurance coverage newcomers, they profit from know-how born within the digital economic system, and their fashionable platforms ought to restrict post-acquisition integration dangers. But it surely’s digital integration that may assist insurers, significantly smaller ones, prolong their services and products into new markets, simply as Bestow has performed with its Lemonade partnership. Each methods — vertical and digital integration — have a spot in a digital insurance coverage technique (as Lemonade’s progress story reveals). For rivals, particularly these prone to displacement as insurtech consolidation accelerates, the emphasis ought to be on retaining tempo.
Digital transformation is right here to remain, and I like the power that digital insurers like Lemonade deliver to the market. Insurance coverage is a big, advanced trade. Many markets are untapped. There’s room for a lot of to succeed, however success begins with putting the shopper on the middle of your online business technique. Lemonade’s strategy isn’t past limits. You, too, can leverage know-how to create a solution-focused enterprise, develop into linked insurance coverage, and embed your insurance coverage traces into your prospects’ shopping for journeys. To study extra on how Forrester will help, please schedule an inquiry.