The US-based full-stack property and casualty (P&C) insurtech that offers homeowners and renters insurance has expanded into a new vertical for the first time since its 2016 launch, per TechCrunch.

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Lemonade signaled its intention to launch its pet insurance product in February and has now released details on the coverage: Insurance will start at $12 per month, while existing policyholders who bundle their renters or homeowners policies will be entitled to a 10% discount. The product is for cats and dogs only, and options include basic hospitalization coverage, a more comprehensive extended accident and illness package, and a preventative and wellness package.

Lemonade’s new offering is likely partially financed by fresh funds from its initial public offering (IPO), which exceeded many analysts’ expectations. Lemonade filed to go public in June, but the announcement was accompanied by skepticism from industry analysts regarding its ability to generate investor interest and the capital it was seeking to raise amid the economic slowdown, as well as its loss-making status. However, Lemonade raised $329 million in its US IPO and secured investor support for its business model.

Expanding into a new vertical that is experiencing premium growth and creates the option to cross-sell policies may aid Lemonade’s path to profitability.

  • The US pet insurance market is underpenetrated but growing. Only around 2% of pet owners currently have pet insurance, yet the gross written premiums in the US and Canada for pet health insurance grew more than 20% to $1.42 billion between 2018 and 2019 — suggesting it’s an underserved market by incumbent insurers that’s growing and ripe for disruption. Moreover, by broadening its product suite, Lemonade will become a bigger threat to incumbents.
  • Lemonade will be able to cross-sell coverage to existing customers, while spending less on marketing. Sales and marketing was one of its largest Q1 2020 expenses, per its S-1. Lemonade states that 70% of its existing customers have pets, and with the option to bundle policies for a discount, it’ll be able to cross-sell its new product as an attractive option to policyholders, which will help control marketing costs.

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