The insurance industry is at a critical juncture in its accelerating use of artificial intelligence tools. According to Lemonade CEO Dan Schreiber, insurance companies must fully embrace AI or risk becoming obsolete.
During his keynote speech at Insurtech Insights Europe in London, Schreiber reflected on State Farm’s infamous 2018 advertisement that mocked AI-powered insurance bots, noting the campaign by the US insurance giant misunderstood the trajectory of the technology in the industry.
The ad, which features two NBA players, appeared to suggest that AI-powered insurance bots lack compassion compared to human State Farm agents. Schreiber said Lemonade saw it as an opportunity to highlight the stark 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.”
In Schreiber’s eyes, the ad made State Farm “look ridiculous” for mocking bots that were already outperforming human agents in terms of customer satisfaction. He said Lemonade’s AI-powered chatbots were already demonstrating greater empathy than human representatives at the time.
For Schreiber, State Farm’s ad was evidence of traditional insurers’ resistance to technological change.
“It’s not good enough to look at what is available today,” he said. “We have to skate to where the puck is going.”
Lemonade’s strategic move, however, was short-lived. Google quickly removed Lemonade’s promoted version of the ad, limiting its reach. Nonetheless, the stunt garnered media attention.
“It shows that first, don’t mess with a company 1,000th your size,” said Schreiber. “You are diminishing yourselves.”
Incumbents still face structural challenges in implementing AI, with legacy systems posing a significant hindrance, behaving like "black holes devouring time and cash,” Schreiber said.
Traditional companies often have tens if not hundreds of disconnected systems that don't communicate. Moreover, existing management teams are groomed to preserve the technological status quo, he said, not transform it.
But AI can no longer be ignored; Schreiber believes AI can simulate any commercially valuable task currently done by humans, emphasizing this is not a distant-future scenario but something already emerging.
"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 told the audience of insurtech and insurance leaders in London.
Schreiber said this reality was “not decades out” for insurance, but “before the decade is out.”
“We’re already using AI in engineering, where it enables our engineers to produce far more code than a human alone could,” he said. “But we’re not far from having AI-powered engineering managers as well.”
AI and machine learning form the backbone of Lemonade’s insurance products for homeowners and renters, which are designed to help customers purchase policies and file claims efficiently. The strategy has paid off for the start-up. It raised nearly $500 million in multiple rounds of venture capital financing, while a 2020 IPO pulled in $308 million.
For the fourth quarter and full year of 2024, Lemonade reported topline growth, improved loss ratios, and positive adjusted free cash flow for the first time. It saw 26% year-on-year growth in in-force premiums, which reached $944 million.
Adjusted EBITDA loss improved 18% to ($24) million in the fourth quarter, while net loss improved 29% to ($30) million.
