Lemonade is getting into pet insurance

Lemonade, the homeowners and renters insurance provider that's raised $480 million, has announced its plans to expand into pet insurance. This marks the startup's foray into a new insurance vertical.

To be clear, Lemonade is simply announcing its plans. Right now, the company is going through the regulatory process, which will make its intentions a matter of public record. The actual pet insurance product won't be available until the regulatory process is completed, which could take "months", according to founder and CEO Daniel Schreiber.

All that said, we don't know too many details about the product, like price or the type of coverage that will be offered. We do know, however, that the coverage will be exclusively for dogs and cats.

A very small fraction of pet owners in the U.S. actually have pet insurance, with numbers ranging between 1 and 2 percent. Meanwhile, 70 percent of Lemonade customers who have purchased a homeowners or renters policy are also pet owners, according to Schreiber.

Schreiber explained that dog ownership is one of many signals used by Lemonade to determine homeowners and renters insurance quotes, as dogs can sometimes play a factor in the risk-assessment of a home, such as deterring burglary. Around 90 percent of Lemonade customers are purchasing an insurance policy for the first time.

Considering those numbers, it makes sense for Lemonade to target that massive segment of its audience with a new product. And it doesn't hurt that, in general, Americans are spending more and more on their pets, with the country spending an estimated $75 billion in 2019 alone.

"Health insurance for pets dates back to over 100 years ago," said Schreiber. "It started with horses in the Netherlands, and the heir to that pet insurance is actually car insurance. Horses were a mode of transportation, and the insurance was meant to protect you if something happened to that mode of transportation. But pets are now members of the family."

Lemonade writes the stack for both its technology and its insurance, acting as a carrier rather than a broker. This gives it some flexibility around the way its policy is actually written. The company has been trying to get regulators on board with an updated, simplified renters insurance policy that gives folks clear insight into what exactly they're paying for.

Schreiber says that the pet insurance policy follows on that path, calling it a "very simple policy" that is "written in readable language."

Lemonade came on the scene in 2015 with a plan to change the way we approach insurance. The company offered a chatbot to take users through the on-boarding process, asking a series of questions and retrieving a quote in about a minute. The company also re-engineered the business model of insurance, wherein Lemonade would take its revenue cut each month and the rest of the unclaimed value would be given to the user's preferred charity at the end of the year.

Schreiber confirmed that the same chatbot flow and charitable contribution features would be included in the pet insurance product.

Folks can sign up for early access to Lemonade's pet insurance here.