Lemonade has lifted the curtain on its tactics in the claims space as the major disruptor looks to upend the industry.
Currently available in New York, Lemonade is billed as the world’s first peer-to-peer insurance company and offers homeowners and renters cover in the state.
The company aims to digitalise the entire insurance process from placement to claims, and co-founder of the firm, Shai Wininger, said that claims processes were a key reason for the start of the business.
“When we started mapping everything that we thought was broken in the old insurance world, one thing kept coming up: just how poor the claims experience was,” Wininger wrote in a post on
Medium.
Wininger noted that it is Lemonade’s unique ‘giveback’, in which unclaimed money is donated to charity, which helps the business avoid the claims failings of companies that use a lack of claims paid to boost profits.
The way Lemonade and other industry disruptors pay claims is often a cause for questions by incumbents in the market. Wininger explained how the Lemonade system will process the majority of claims instantly.
“The part of our product that got the most attention was the claims system,” Wininger said.
“After looking at commercial insurance software it was clear that we needed something completely different.
“Our team spent months learning how claims are handled by humans in old insurance companies.
“We then used this knowledge to craft an instant claims experience for our claims bot — AI Jim. The algorithms powering AI Jim ‘understand’ the nature of claims, their severity, and whether the user is in a state of emergency.
“AI Jim also tries to assess the likelihood of a claim being fraudulent and even nudges people to be more honest by incorporating years of behavioural economics research into every little detail in the conversation and the UI.
“Jim’s AI tracks loads of user-generated data-points to help us identify suspicious activity and predict what our customers need before they even know it.”
In its first month, the system has tracked 3.7 million signals, Wininger confirmed. The claims bot either pays a claim instantly or forwards details of the claim to a human for further work.
As artificial intelligence creeps further into the insurance industry, Wininger was quick to note that the use of technology does not mean every claim will be paid as the business will look to set customer expectations early.
“Having AI and a good infrastructure doesn’t mean that we’ll blindly and automatically pay every claim we get. Insurance is a regulated business, and even if we wanted to, paying every claim will put us and our reinsurers out of business quickly,” Wininger continued.
“So, setting expectations is very important, and is something we’ll be working on improving constantly.”
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