Why Lemonade is a grenade we should all be thinking about

The convergence of Robotic Process Automation (RPA), Big Data and Philanthropy

Is your industry at risk of losing more than a quarter of market share in a matter of months to a tech startup? (Probably). Could your business model be boycotted by increasingly ethically-orientated consumers? (Maybe). Is your job – and perhaps career – at threat from automation? (Almost definitely).

We are already living in the future – but unless you have seen the power of automation first hand, you might not yet realise it. Robotic Process Automation (RPA) has passed the tipping point from emerging to current technology as it becomes viable, affordable and implementable across an increasing number of workflow processes.  In the insurance industry, the face of automation is Lemonade, who promise: “Instant everything, killer prices. Powered by tech.”

Lemonade is a case study of how delighting customers can drive near-instant exponential market share in an established and saturated industry, against incumbents who have on average over 100 years of corporate experience each. Lemonade’s market share of new insurance policy sales went from zero to 27.6% in New York within a few months of launch.  It’s biggest market? California. It’s nearest employee? 3,000 miles away. The secret? A three pronged approach to technological innovation.

Robots > People

Lemonade’s customer interface is conducted online via chatbot: it has no human insurance brokers. Their headline promise: “zero paperwork and instant everything by replacing brokers and bureaucracy with bots and machine learning.” If you’re a company, the benefit of RPA is it can replace manual processes performed by your staff, cheaper, faster and with zero of the exceptions and errors that annoy customers, slow fulfillment down and cost resource to correct. Repeatable processes, like insurance quotes and claims, are easy – and profitable – to automate. Bots fulfill work significantly faster than humans, and they do it error free: they don’t get tired, distracted or deviate from the rules supplied to them. 

Bots have become a profitable investment within a calendar year when replacing simple, manual processes, even with the cost of one off implementation. It’s a compelling proposition when you are looking to increase efficiency, minimise errors, drive down costs and boost the bottom line. On the other side of the equation sits a customer, who wants a quick, simple, error free interaction. That combination makes contacting Lemonade’s virtual assistant, ‘Maya’, preferable to the roulette that human customer service interaction can be. Executed correctly, automation is a company-client win-win, as the success of Lemonade’s proposition proves.

If you’re a CEO, you aren’t asking whether you should be automating: you are deciding which areas to automate first. The consequence of that is, if you’re an employee with no aspiration to adapt, Lemonade isn’t offering benefits: it’s offering a problem that doesn’t exist in the future. That problem exists now, and is called ‘redundancy’.

Using big data effectively

Lemonade’s second point of leverage is their ability to use Big Data to maximise accurate decision making. As the co-founder of Lemonade points out:

“an executive at one of the largest insurers told me that ‘other’ is their most common cause for a claim. People (unlike bots) lazily tick that catch-all box, rendering their data useless… (whereas) tech companies… monitor the loss ratio per device, browser… those who bought it from home, to those who bought it on their commute, those who bought it at 4pm, to those who bought it at 2am. Not only will the machine answer all these questions, it will ask a myriad more we didn’t know to ask.”

Company with long and prestigious histories like to talk about ‘data lakes’. In reality, legacy systems often prevent basic data being captured, let alone mined for problems you “didn’t know to ask.” 

‘Giving Back’ by capping profit

Lemonade charges a 20% flat fee on premiums. This caps Lemonade’s profit in an easily understandable, transparent way. Traditional insurance companies don’t do this: they are built to maximise profit (for example,  through higher fees and lower claim payouts). Once Lemonade’s fixed fee is accounted for and claims settled, what’s left is donated to a non-profit of the customer’s choice, through Lemonade’s ‘Give Back’ initiative. This particularly appeals to younger generations. The upside is: if your company isn’t seen as a proactive force for social good by increasingly ethically orientated consumers, your customers might start giving  their cash to a competitor that is.

Generating leads at zero acquisition cost

Insurance shoppers have three good reasons to use Lemonade: 

  1. Lemonade promise a zero admin experience through the use of bots and RPA; 
  1. Big Data estimates customer premiums forensically – leading to cheaper prices for mispriced segments of the market;
  1. Customers value the transparency fixed fees offer, and know some of their premium will ultimately be used to fund a charity of their choice. 

Customers clearly like the experience. Referrals are the holy grail of new business, and social media is the cathedral where firms can generate them exponentially.  Generating social media referrals means a potential customer experienced your offering, paid you money, and then told all their friends to go pay you their money. You get a network multiplier effect at virtually zero acquisition cost. In May 2019, almost one in five visits to Lemonade was via social media. The lesson? If you provide a service that feels as frictionless as hydroplaning in a fast car down a wet highway, you can win new business at zero acquisition cost through referral. 

Disarming the Lemonade Grenade

A version of Lemonade is coming for you. How can traditional incumbents, who organize themselves geographically, compete against platform led tech platforms that focus on customer insights, journey and delivery – with constant data-driven iteration? And how can leaders recode their businesses, themselves and their staff to meet the challenge posed by the digital age: providing a proposition better, faster and cheaper than competitors? FInally, what skills should employees curate to ensure they remain relevant, not just for the next five years – but for the next 20? 

Innovation Labs Asia believes the key lies in a combination of adaptation and evolution. Leaders need to ‘recode’ themselves with skill sets that didn’t exist at the turn of the century, while companies need to redesign operating models to combine digital workforces with employees focused on innovation. The objective is to free humans from the monotonous, repetitive processes that marked the first industrial revolution, and instead use human imagination to create and enable frictionless experiences that provide progress, productivity and purpose. We’d do well to remember that technology as an existential threat to the workplace is nothing new. Elbert Hubbard wrote the following over a hundred years ago: “One machine can do the work of fifty ordinary men. No machine can do the work of one extraordinary man.” Our focus, then, must be on shaping ourselves to be extraordinary, so we can use technology as a tool to shape the world into a better place.

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