Anthony Di Pizio, The Motley Fool

Wed, Jun 18, 2025, 2:35 AM6 min read

• Lemonade is revolutionizing the insurance business by using artificial intelligence to rapidly write quotes and settle claims.

• Lemonade's in-force premium recently crossed $1 billion for the first time, but management thinks it could grow tenfold within a decade or so.

• Lemonade stock is trading at near the cheapest level since it went public, and it could be a great long-term buy.

• 10 stocks we like better than Lemonade ›

Lemonade (NYSE: LMND) has been developing artificial intelligence (AI) since 2015, long before the technology captivated Wall Street a couple of years ago. The company is using AI to transform the insurance industry by writing quotes in seconds, and paying claims in minutes instead of days or weeks.

Lemonade has attracted over 2.5 million customers so far across its homeowners, renters, life, pet, and car insurance products, and the company has outlined a plan to grow its business tenfold over the next decade.

Lemonade stock is down 75% from its record high set during the tech market frenzy in 2021. It was unquestionably overvalued back then, but it's now trading at an attractive level in light of the company's growth and its future potential. Here's why the stock could be a great addition to any diversified portfolio right now.

Most traditional insurance companies have cumbersome processes, especially when it comes to claims. But Lemonade's AI-powered approach prioritizes automation, which ensures a fast and convenient customer experience. The company's AI chatbot, Maya, can provide an insurance quote in under 90 seconds via the Lemonade website, and for existing policyholders, AI Jim can settle claims in less than three minutes.

Lemonade also uses AI to calculate the most accurate premiums, which can save customers a significant amount of money over the long term. The company's lifetime value models use AI to predict the likelihood of each policyholder making a claim, switching insurers, and buying multiple policies. These models also assist with operational duties like marketing by identifying underperforming products or geographic locations so management can make strategic adjustments to maximize revenue.

In the third quarter of 2024 (ended Sept. 30), Lemonade highlighted some of the benefits of its AI approach. The company grew its in-force premium (IFP) by 24% year over year during that quarter (which is the value of premiums from all active policies) while reducing its workforce by 7% at the same time. In other words, Lemonade is bringing in more money per employee thanks to automation.