Lemonade, Inc: Disrupting the Insurance Industry

Founding Member at Lemonade, Inc & Former President at AIG

Why is this interview interesting?

  • Why there is a misalignment of incentives between insurers and insured
  • Core differences in Lemonade's business model versus traditional carriers
  • Challenges Lemonade faced negotiating reinsurance
  • Structural changes in insurance distribution and the role of brokers
  • Challenges for insurers to move away from broker channels
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Executive Bio

Ty Sagalow

Founding Member at Lemonade, Inc & Former President at AIG

Ty is an insurance veteran with over 35 years experience in the industry. He was a founding member of Lemonade, Inc, the insurance technology unicorn, joining the co-founders as the first employee in 2015 as Chief Insurance Officer responsible for building the insurance operations. Ty joined AIG in 1983 and progressed to Chief Underwriting Officer of AIG’s National Union subsidiary and Chief Operating Officer of e-Business Risk Solutions. In 2009, Ty joined Zurich Financial Services as Chief Innovation Officer where he was responsible for new product development across all product lines. Read more

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Interview Transcript

Great to have you with us, today. I think a good place to start would be to provide some context to your role in the founding story of Lemonade.

I was an insurance guy and have been in insurance for 38 years, and at the time of Lemonade, which was 2015, about 33 years or so, always with big organizations. I was on my own, at that point, operating a one-person insurance consulting firm, after 25 years at AIG, American International Group. I get a phone call from Tel Aviv. I didn’t know it was Tel Aviv at the time, because it was this individual with this nice, British accent. His name was Daniel Schreiber. He wanted to talk to me about this new insurance company that he wanted to create, with another Israeli entrepreneur, named Shai Wininger. These were two technologists; they didn’t know anything about insurance. They were just talking to themselves, for about a month and they had a list of three potential industries that they wanted to disrupt.

Their criteria were that they wanted the industry to be very, very, very big; they wanted the industry to have extremely bad technology and it would be good if everyone hated the industry. I don’t remember what the other two candidates were, because insurance was, by far, their favorite. They decided that they wanted to completely disrupt the insurance industry, but they knew nothing about insurance.

So they Googled, from Tel Aviv, insurance and innovation and apparently, even from Tel Aviv, my name was above the fold. My company was Innovation Insurance Group. It’s always good to name your company the obvious thing that you want to do for a living. They called me up and Daniel asked to see me. I had an office in the World Financial Center, in New York at the time. He came in and we talked for a couple of hours and he asked me to go over to Tel Aviv and talk to him and his partner about this new company they wanted to create.

Why did you think that insurance was so ripe for disruption?

Insurance, in general, is not very creative, which is one of the reasons I love the idea of being an innovator in insurance. A long time ago, I realized that it’s a good career move to try to find an area with very, very few people doing it. There’s not a lot of people being innovation leaders, in insurance. If you pick something that not a lot of people are doing, you don’t have a lot of competition to be best at it. It’s like banking. There’s just something cultural, about insurance, where people don’t think out of the box.

There are, of course, exceptions. One of the reasons why AIG was as successful as they were, for so many decades, was that Hank Greenberg thought differently. He wanted to do things that were different from all the other insurance companies. Most of the time, but not all of the time, he was very successful. That’s how I thought; it was in my DNA. If that’s how you think, then you find an area where not a lot of people think that way. I was lucky.

Insurtech found its place and people like Daniel Schreiber and Shai Wininger, who came from technology, realized that they’d found and industry that was ripe for innovation and was ripe for a need for a different approach towards their customers and a different business model. That’s what intrigued me about Lemonade. It was a different way of conducting insurance.

What was so different about the business model, for Lemonade?

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Lemonade, Inc: Disrupting the Insurance Industry(May 13, 2020)

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