9 February 2016 Insurance

Berkshire Hathaway and Munich Re back revolutionary P2P insurer

Some of the industry’s biggest players have agreed to back Lemonade, the world’s first peer-to-peer (P2P) insurance company, which has already attracted a number of well-known former re/insurance executives to its executive team.

Berkshire Hathaway’s National Indemnity, Everest Re, Hiscox, Munich Re, Transatlantic and XL Catlin have all agreed to reinsurer the start-up alongside two as yet unnamed syndicates at Lloyd’s of London.

Lemonade set records with its initial funding by investment firms Sequoia and Aleph, followed by its announcement that a cadre of senior insurance executives had jumped ship to Lemonade.

Some of the well-known executives who have joined include Ty Sagalow, the former president of product development at American International Group (AIG), Robert Giurlando, previously chief underwriting officer at ACE, James Hageman, previously senior vice president of claims at ACE, Ron Topping, previously AIG’s head of financial planning and analysis (P&C), Americas.

The company has been relatively secretive so far about the exact nature of its offering. But with its reinsurance partners now in place, a full consumer launch in now ready for the coming months.

“We’re proud to support Lemonade’s creation of a fast, simple, and consumer driven insurance platform,” said Mike McGavick, chief executive officer (CEO) of XL Catlin.

“Consumer trust in the insurance system is at the heart of the insurance business, and is essential to the success of any new venture. With this collection of leading reinsurers, Lemonade’s customers will know this innovative venture is backed by some of the best and most established in the industry.”

Daniel Schreiber, CEO and co-founder, Lemonade, added: “For insurance to provide true peace of mind you want to know your insurer is both willing and able to pay your claims.”

“Lemonade is the only insurer that doesn’t make money by denying claims - so no one is more willing than us.  With the backing of the world’s foremost reinsurance names, no one is more able either.”

In an interview with Intelligent Insurer earlier this year, Sagalow, chief insurance officer of Lemonade, said the new venture is the most exciting thing he has been involved with in a 20-year career focused on innovation in the insurance industry.

While similar peer-to-peer ventures have been launched in Europe, they tend to be managed by brokers as opposed to being a fully regulated insurer with the requisite security.

The company has been guarded on exactly how its offering will work simply stating that it will harness “the power of behavioural economics and the sharing economy, delivering to consumers an insurance experience that is instantaneous, un-conflicted and downright delightful”.

Sagalow said the business will work as expected by pooling the premiums of individuals in a similar way to a mutual or P&I club might work.

But he stressed that there will also be big differences between these business models and what Lemonade is offering. And in contrast to other peer-to-peer products that have been launched elsewhere, any policy will be guaranteed by the carrier, which will also have the ability to purchase reinsurance.

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