Lemonade’s CEO: State Farm’s Ad Missed the Mark on AI
The insurance industry is at a pivotal moment as it rapidly integrates artificial intelligence. According to Lemonade CEO Dan Schreiber, insurance companies must fully embrace AI to stay relevant. Speaking at Insurtech Insights Europe in London, Schreiber recalled State Farm’s 2018 advertisement, which he felt misunderstood the trajectory of AI in the industry.
The ad, featuring two NBA players, seemingly suggested that AI-powered insurance bots lacked compassion compared to human State Farm agents. Schreiber saw it as an opportunity for Lemonade to highlight the technological contrast between itself and traditional insurers.
“We absolutely loved that ad,” Schreiber said. “We downloaded it and we started paying to have it promoted on Google.” He believed the ad made State Farm “look ridiculous” for mocking bots that were already outperforming human agents in terms of customer satisfaction. He noted that Lemonade’s AI-powered chatbots were already demonstrating greater empathy than human representatives at the time. In Schreiber’s view, the ad demonstrated the resistance of traditional insurers to technological change.
“It’s not good enough to look at what is available today,” Schreiber stressed. “We have to skate to where the puck is going.”
Challenges and Opportunities in AI Implementation
Lemonade’s strategic move to promote the ad was short-lived, as Google quickly removed their version. However, the action garnered media attention. Schreiber stated, “It shows that first, don’t mess with a company 1,000th your size. You are diminishing yourselves.” He highlighted that incumbents still face significant challenges in implementing AI, primarily because of legacy systems that act as a bottleneck.
Traditional companies often grapple with many disconnected systems that lack communication, consuming time and resources. Moreover, current management teams are frequently geared towards maintaining the status quo rather than driving technological transformation. Schreiber believes that AI can currently simulate nearly any commercially valuable task performed by humans, emphasizing that this reality is rapidly approaching, not a distant prospect.
“We envision a future, not a distant one, where many of our colleagues are AIs. Imagine an actuary who can join a Zoom call anytime, 24/7, with access to all of Lemonade’s historical and real-time data,” he informed the audience of insurtech and insurance leaders.
Schreiber indicated that this reality was likely “before the decade is out.” He added, “We’re already using AI in engineering, where it enables our engineers to produce far more code than a human alone could. But we’re not far from having AI-powered engineering managers as well.”
Lemonade’s Success and Future Outlook
AI and machine learning are the foundation of Lemonade’s insurance products for homeowners and renters, designed to help customers purchase policies and submit claims efficiently. This strategy has proven successful for the start-up. Lemonade has raised nearly $500 million across multiple rounds of venture capital financing, with a 2020 IPO generating $308 million.
For the fourth quarter and full year of 2024, Lemonade reported revenue growth, improved loss ratios, and positive adjusted free cash flow for the first time. It experienced a 26% year-over-year increase in in-force premiums, reaching $944 million. Adjusted EBITDA loss improved by 18% to ($24) million in the fourth quarter, while net loss improved by 29% to ($30) million.
