Daniel Schreiber: Modernizing a Trillion-Dollar Industry

The call from 10 Downing Street arrived at the right moment. Daniel Schreiber and the small team at Lemonade had spent the past year battling to break into the insurance business and were nearly out of money. The pitch was tantalizing: Set up shop in the UK, which was aggressively courting ambitious startups tackling regulated industries like insurance.

In the summer of 2016, Schreiber flew to London for the meeting. The conversation delivered the first good news the team had heard in months. For a year, Lemonade had been beating its head against the wall trying to secure a US license. After just one meeting at 10 Downing Street, the UK was eager to fast-track a pan-European license that would get Lemonade up and running across the EU. "We just need to get through the Brexit vote next week," the Prime Minister’s staff assured them.

The rest, as they say, is history. Lemonade kept its headquarters in New York and eventually secured its American license. But that outreach from London proved prophetic. While the US is Lemonade’s largest market, the UK and Europe are its fastest-growing.

Reaching $1B and 1M - How Lemonade insurance scaled to success

Raised in London, Schreiber studied law in the UK before immersing himself in the vibrant startup cultures of both Tel Aviv and Silicon Valley. These transatlantic experiences helped Lemonade scale to a public company with more than $1 billion in premiums and over three million customers — reaching those milestones faster than any other major US insurer.

As part of our series on European startups, we talked with Schreiber about how the company nearly failed in its early days, his vision for a 21st-century insurance company, and why insurance regulation in the European Union is far less onerous than in the United States.

Interview with Daniel Schreiber

Before starting Lemonade insurance, you and your cofounder Shai Wininger each had decades in tech but no experience in insurance. Why tackle this industry?

Daniel Schreiber: In 2015, I went to a week-long conference in Silicon Valley called Singularity University, run by Ray Kurzweil and Peter Diamandis. I was looking for my next gig and went there to think and get new ideas. During one of his talks, Peter mentioned, almost in passing, the idea of peer-to-peer insurance. I was intrigued, and it sent me down a rabbit hole.

After starting Lemonade, I reached out to Peter and said, “We should get together for coffee. I’m doing that thing you mentioned in your talk.” And he said, “That’s really exciting, but I was referring to using DNA sequencing for health insurance.” So, I like to joke that Lemonade was born from one big misunderstanding.

But in all seriousness, insurance is an entrepreneur’s dream. There’s almost no sector bigger. It’s disliked and distrusted, and it’s dominated by the same players who ruled 100 years ago. There’s a lot of room to do things differently.

What was it like trying to break into such a conservative, established industry?

DS: We almost didn’t make it. We were running out of money and had no license. It had been a year since we applied and we were making zero progress. Even though we were down in New York’s Financial District and could literally see the regulator’s offices about 100 meters away, we couldn’t get a meeting. Everything had to be in writing. We were pulling our hair out. It felt very ancient and archaic, and I was startled to discover that this is how insurance regulation works in the US.

In fairness, the regulators had no real motivation to support us. We were risky and probably a bit obnoxious in the way startups can be. That didn’t endear us to them. Over time, we learned how to play the game better, and regulators learned to trust us. We've now have great relationships with them.

What was your vision for a modern, digital, AI-driven insurance company?

DS: We wanted a completely different user experience: a great app, automated claims payouts, and better value for consumers. We can offer lower prices because we have fewer operating costs — almost no brokers or agents, no huge call centers, no massive underwriting departments — and because we use advanced proprietary AI models to better pinpoint risk.

We also wanted to make insurance less distrustful. That led to the giveback mechanism and our decision to become a public benefit corporation. Money left over after paying claims is donated to charities chosen by our customers. That innovation reduced the conflict of interest that plagues the industry.

Have you achieved that ambition of being better at evaluating and quantifying risk?

DS: It’s a process. You need to sell a lot of policies and process a lot of claims for machine learning to uncover deep relationships in the data and in human behavior. Two or three years ago, we reached a point where our underwriting started producing very strong results. But it's not a one and done. You keep refining your understanding. Groups of consumers that look monolithic one day start breaking into subgroups the next once you have enough data. It’s a never-ending road to improvement.

You’ve talked about how telematics data from cars allows Lemonade to identify low-risk drivers and offer them significant discounts. What prevents legacy auto insurers from doing the same?

DS: It's a good question because telematics is such a powerful tool, and it’s not some secret technology they don't have access to. I think this is a classic Innovator’s Dilemma. If I’m the CEO of an incumbent insurance company and someone tells me, “We’ve got a new tool that shows we should lower rates for two-thirds of our drivers, and raise them for the remaining third, who may then leave,” I’d probably want to bury that tool and never talk about it again. It’s deeply disruptive to their existing business model.

Europe is becoming an increasingly important market for Lemonade. How do you see the insurance opportunity there?

DS: We see it very favorably. So far, we’re just doing homeowners and renters insurance, but it's growing much faster than our US business.

The regulatory environment is also very different. In the US, if our data signals suggest we’re underpriced and need to raise premiums in some market, we have to submit filings to state regulators and wait days or months for approval. And we have to do that separately in all 50 states. The EU has none of that. Regulators trust market competition to discipline pricing, which allows companies far more flexibility. As a result, everything moves much faster.

That's so counter to the narrative about the EU and over regulation. It's fascinating.

DS: Totally. Certain regulators in America are very centralized and bureaucratic, with controls and processes that at times feel almost Sovietic.

Looking ahead five years, what does success look like for Lemonade?

DS: We'd like Lemonade to become one of the truly iconic brands of the 21st century. Insurance brands can become enormous — $100 billion businesses that endure 100, 200, or in rare cases, 300 years. We'd love to be a modern incarnation of that.

Daniel Schreiber is CEO and co-founder of Lemonade, the insurance carrier powered by artificial intelligence and behavioral economics. GV first invested in Lemonade in their Series B funding in 2016. Prior to Lemonade, Schreiber co-founded the internet security software company Alchemedia Inc. and later held senior roles at M-Systems, Sandisk, and Powermat Technologies.