Decoded: How the Insurer LEMONADE Eliminates Decision-Making Barriers in their Online Purchase Process

Imagine yourself buying insurance. Now eliminate the building, the paperwork, and even the sales agent. Can you picture yourself buying insurance without all that? Well, Lemonade makes it happen. 

In this article, you’ll discover:

  • How Lemonade — the insurance company — closes the trust gap between the client and the company;
  • How Lemonade eliminates barriers to insurance purchase decisions by eliminating uncertainty, making the process faster while also making it surprisingly more human with AI; and
  • How Lemonade uses the behavioral design principles of salience and chunking in their user Interface to spare the users’ of their cognitive energy.
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Lemonade is an online insurance company built on a business model informed by behavioral science. Leading the way for modern insurance, the company has targeted one of the biggest hurdles in the insurance game — the trust gap. 

With traditional insurance, there’s a clear conflict of interest. Insurance companies want to make more money by reducing your claim amount, the consumers know this and try to exaggerate their claims. The companies are now aware of this and try to make approving your claims the most complex, Kafkaesque, uncomfortable process, second only to the process of taking the insurance policy in the first place. 

To win trust, Lemonade charges a flat rate for their keeping; they use the rest to pay your claim, and any extra change left goes to the charity of your choosing.

All in all, you end up getting sucked into a very convoluted, bureaucratic process that you begin to think you were better off without.

So, how does Lemonade restructure this trust game to instead bring out the best in us? By bringing in third-party — charitable organizations of the consumer’s choosing. They charge a flat rate for their keeping; they use the rest to pay your claim, and any extra change left goes to the charity of your choosing. This aligns incentives, removes the desire to cheat, and the best part about it — the entire process is online.

It almost seems too good to be true, so we spoke to Nikola Bernatova, Behavioral Consultant at MINDWORX Consulting, to walk us through their online insurance purchase process step by step and so we can come to understand just how exactly Lemonade is able to overcome behavioral barriers by employing simple behavioral science principles in their online insurance process.

Step 1: Introducing Maya — the AI chatbot

Possibly the biggest hurdle Lemonade had to overcome was making the online experience more human since customers sometimes prefer conversing with a real human on topics as serious as insurance. As per a Deloitte survey, branches are still valued as the first channel of communication when applying for new products and are still a defining factor in customer satisfaction.

Lemonade introduces users to their AI chatbot Maya, a friendly face to guide you through the sign-up process. Source: https://www.lemonade.com/

So how does Lemonade overcome this barrier — well, they simply humanize the online experience with AI. Kind of seems like an oxymoron of sorts, right? According to Nikola, they do this by introducing Maya — who appears to have an average, smiling human face, something you might not even find in most physical insurance centers. 

She appears warm, friendly and maintains a simple conversational tone. 

Nikola recommends this as a great way for companies to build a more humanized experience. She cites the example of how sending newsletters and other emails from an email ID that appears to be connected to an actual person, as opposed to something like — newsletters@domain.com, has a higher chance of being viewed. 

Sending emails from an email ID that appears to be connected to an actual person, as opposed to something like — newsletters@domain.com, has a higher chance of being viewed.

Step 2: Pick Your Insurance Type

The process then moves on to picking the type of insurance you’re looking for. This is coupled with simple graphics that complement the context of the choice and light up when you click on it. 

As we move further along the sign-up process, we see simple graphics prompting us to pick our desirable option. Source: https://www.lemonade.com/

According to Nikola, this is a key takeaway from Lemonade’s UX design that companies generally tend to mess up by adding fancier graphics, which further tends to distract the user and take up more cognitive energy to process. 

As we can recognize here, the process follows a simple, step-by-step design, resembling something as simple as selecting your Subway toppings. The only salient call-to-action button is the ‘next’ button, leaving no room for distractions or confusion. This again is something easy to process and sets the tone for how you can expect things to move further. 

Step 3: Enter Your Name

In this step, Maya — the AI Chatbot, as Nikola states, does something extremely important that eliminates a major barrier to the entire insurance process.

It’s now time to dispel some personal details, while Maya assures us the process should be done in minutes
Source: https://www.lemonade.com/

She assures that you’ll get your price in minutes — eliminating any uncertainty on whether this is going to be an unending process, like any other insurance or not. Uncertainty is a major barrier that companies need to remove for the consumers. Besides removing uncertainty, she significantly reduces the perceived effort.

Uncertainty

Uncertainty is a situation when your customer has incomplete or missing information. A situation when their questions, concerns, and fears aren’t answered.

Perceived effort is a very important yet overlooked principle from behavioral science. It basically says that the more effortful we perceive something to be, the less likely we are to complete it. A process can objectively be short and simple, but it can still seem long and difficult. The key, therefore, is to make people feel like it’s easy. 

A very effective approach is to use words which evoque easiness and give users a time estimate of how long it will take.

Step 4: Enter Your Address

In this step, notice how Maya immediately personalized the process by calling the consumer by his name. Granted, this is a process that is already extensively used by most companies these days. 

Maya walks you through the sign-up process by employing the principle of chunking. 
Source: https://www.lemonade.com/

That being said, its impact is still strong. An Everstring survey reported that close to 70% of brands named personalization their top priority. Moreover, looking at it from a consumer point of view too, the need is strong. This 2018 Accenture Survey shows that around 91% of customers are more likely to engage with brands that ‘recognize’ and ‘remember’ them. 

Another key takeaway emphasized by Nikola is Lemonade’s use of the behavioral design principle of chunking. Chunking long processes into smaller, easily digestible chunks of information decreases the perceived effort to finish the process and will help users reach the end faster. 

91% of customers are more likely to engage with brands that ‘recognise’ and ‘remember’ them.

What Could Lemonade Do Better?

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