Lemonade: no viable escape from big tech’s direct-to-customer routes

Upstart insurtech  Lemonade won’t likely plow its way around the direct-to-customer routes established by big tech names like Google or Facebook, although agent-based solutions and partnerships remain hopeful fringe elements, CFO Tim Bixby has indicated.

“They are the least horrible channel there are,” CFO Tim Bixby told a luncheon conference hosted by the KBW equity house.

Payments made to Google, Facebook and the other masters of online client reach are “extraordinary, but they are effective.”

Lemonade holds out hopes that some form of agency relations or partnerships can fill in around the edges, albeit without much hope that big tech can be outmaneuvered.

Lemonade has struck what Bixby considers to be “testing structures” with several unspecified insurance agencies that stepped forward with signals of interest. Management may yet slate a meeting with investors to discuss outlook for the channel, he indicated.

“We're not religious, so never say never, but direct is still the core,” Bixby said. “But I can see over time where agent could increase a bit in terms of proportions.”

Partnerships for sharing client contacts and leads are the “holy grail” for the industry: a time-consuming quest for a low-probability of success. Bixby compares it to panning for gold:  “You have to have lots and lots for a handful that work.” Lemonade claims “three to four.”

Beyond customer acquisition, Lemonade hopes to lean ever more on the cross-sell to the current client list.

“We're at a point when more and more of our growth can come from existing customers,” Bixby said. But current product to customer ratios are only fractionally above the 1x mark and renters insurance, as an entry point and despite above-normal data insights into clients, doesn’t necessarily generate a client immediately headed to a fuller product line.

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