The insurtech has a clear roadmap following the Metromile acquisition, having onboarded 80% of staff and sold its EBS platform to EIS

Insurtech Lemonade has addressed the 20% staff cuts it made to Metromile following completion of its acquisition of the personalised pay-per-mile auto insurance firm.

The insurtech laid off 60 Metromile workers hours after closing the $145m (£119.8m) deal at the end of last month (28 July 2022).

In a letter to shareholders published this week (8 August 2022), Lemonade said that “downturns have their upsides”.

It added: ”We explained the strategic impact of [the staff reductions] at the time the deal was announced, adding that beyond collapsing time and flattening risk, this deal also ‘makes for significant efficiencies… the combined entity can provide more and perform better with fewer resources than the two companies would on a standalone basis.’

“Accordingly, Lemonade has onboarded about 80% of Metromile’s staff, in recognition of the synergies the deal offers. The closing of the Metromile transaction changes our product mix significantly.

“Renters now comprise about a third of our book, down from almost a half, while car jumped from 1% to 20% overnight. In the coming months we have our work cut out for us.

“During this transitional time – and until we can offer a unified Lemonade Car experience – we expect to expend little-to-no marketing dollars on acquiring new customers to Metromile. Accordingly, we anticipate car to represent a somewhat declining portion of our book in H2, given the natural churn inherent in the business.”

Lemonade received a business with more than $155m (£127m) in cash, over $110m (£90.1m) In-Force Premiums (IFP), a second insurance entity with 49 state licenses and data from half a billion road trips.

It has also acquired nearly 100,000 new customers from the deal.

Platform sale

Meanwhile, Lemonade sold Metromile’s Enterprise Business Solutions (EBS) platform – a Software-as a Service (SaaS) claims and fraud detection platform – to global firm, EIS. This transaction was completed before the close of the Metromile acquisition in July. 

Alec Miloslavsky, founder and chief executive at EIS, told Insurance Times: “UK insurers are facing unprecedented rising claims costs due to the pandemic, recessional conditions and extreme weather conditions, both in terms of the number of claims, claims fraud and the cost of servicing them.

”Automating the claims process, using machine learning to detect fraud or identify low-risk claims are examples of crucial capabilities in reducing costs for insurers and ensuring the provision of a smooth and efficient service to their customers.

”The EBS acquisition enables our property and casualty (P&C) insurance carrier clients to further automate their claims and fraud operations and successfully bridge the existing gaps in their systems digitally.”

Miloslavsky explained that this was a ”first step on a roadmap towards building a complementary Data Science (DS) line of solutions” for its current and future customers. 

At the time of the deal Daniel Schreiber, Lemonade’s chief executive, said: “Between collapsing time, flattening risk, and increasing efficiencies, this deal has the potential to unlock tremendous value for our shareholders and customers.

”We have a detailed plan for how to turn all that potential into reality, and our modelling suggests that within 18 months of closing the deal, we will reap the fruits in the form of a larger, more efficient, more differentiated, and less risky Lemonade Car business.”

  • Insurance Times has converted dollar amounts into pounds using an exchange rate of £1 = €1.22, which was correct as of 1 August 2022.