Lemonade CEO: Many Insurers Will Fail the AI Test
The insurance industry, traditionally known for its cautious approach to innovation, is undergoing a significant transformation driven by artificial intelligence. As insurers seek to improve operational efficiencies and customer experiences, they are increasingly embracing AI and generative AI technologies.
At the recent Insurtech Insights Europe conference in London, numerous organizations highlighted their advancements in AI innovation and integration. However, Lemonade CEO Daniel Schreiber believes that only a select few companies will truly thrive in the long term.
“I think that many companies will absolutely fail at the AI test,” Schreiber stated during his Wednesday keynote address. “They’ll fail at it for the same reason that most acquisitions fail. On paper, it all makes sense, but there isn’t a DNA match and there’s organ rejection.”
Cultural Adaptation is Key
According to Schreiber, successful AI adoption necessitates a cultural transformation, not just a technological one. Companies that fail to align their organizational culture with AI advancements will likely struggle during implementation, leading to failure.
“The only way for AI to be successful in the organization, beyond being a tool that people use to write things and query, is if you prepare for it,” Schreiber explained. “AI, like people, needs to be trained. It needs feedback. It needs to be managed. It needs people looking over its shoulder and saying ‘yes’ and ‘no.’ If you build that platform, AI adoption will come.”
Schreiber further emphasized the need for organizations to be able to “fire” AI when necessary. He suggested a framework similar to those used for human employees, including HR departments, feedback cycles, and performance reviews, should be implemented for AI systems.
However, Schreiber noted that many insurance industry leaders mistakenly assume that AI management is solely the responsibility of the IT department. He emphasized that this overlooks the broader organizational infrastructure required for success.
Schreiber co-founded Lemonade in 2015. The insurtech company offers a range of insurance products including renters, homeowners, car, pet, and life insurance in the US and parts of Europe, including Germany, the Netherlands, and France. Lemonade’s platform leverages AI-driven solutions to replace traditional brokers. However, the company has faced criticism for its AI use, including accusations that its AI system boosted profits by denying claims. In 2021, Lemonade was the subject of a class-action lawsuit in the US over alleged mishandling of biometric data.
Despite the controversies surrounding the insurtech’s AI practices, Schreiber is adamant that AI-native firms are better positioned for growth due to their ability to scale and innovate more rapidly than incumbent companies.
“Many of today’s major brands have survived and thrived for hundreds of years,” Schreiber observed. “But longevity should not be confused with immortality, because a new revolution is afoot. It’s gathering steam, and it’s rendering incumbents structurally disadvantaged.”
