This story was delivered to BI Intelligence " Fintech Briefing " subscribers. To learn more and subscribe, please click here . BI Intelligence Nine months after raising $13 million from investors including Sequoia Capital, P2P insurtech Lemonade finally revealed its business model — and it has a twist, the Financial Times reports. The app-based firm, which offers rent and home insurance policies (at $5 and $35 a month, respectively), launched in New York on Wednesday. It works by asking all new customers to choose a charity, and then pays premiums from all customers who choose the same charity into a pool. Lemonade takes 20% of the premiums up front, and then claims are paid out of this pool — any money left at the end of the year is donated to the pool’s nominated charity. For context, legacy insurers normally keep any money not paid out in claims for themselves. Initially, the app will offer a default list of 15 charities, but in the future, the list will expand to accommodate customer preferences. Lemonade said the donation model was designed to help combat insurance fraud. CEO Daniel Schreiber explained that by linking insurance with a charity that a customer feels passionate about, these customers will be better disposed toward their insurer, and will therefore be less likely to file a fraudulent claim. Lemonade will also use other fraud-deterring techniques like asking customers to sign documents certifying that everything they claim is true at the outset of the claims process, rather than at its conclusion. Fraud is a pervasive problem across the insurance industry — an AXA study found that at least a third of UK consumers have made fraudulent claims. In most cases, that’s because they thought their insurer would try to avoid a pay out even if they […]
