Lemonade and Porch Show AI Is Rewriting Insurance Math

Earnings from Porch Group and Lemonade show artificial intelligence (AI) moving into core insurance functions, with measurable effects on claims handling, underwriting and distribution.

As detailed in results this past week, Lemonade provides one of the clearest examples of AI applied to claims and servicing. In its shareholder letter, and in reference to loss adjustment expense, the company states that “AI-powered automation drives LAE ratios of ~4%,” pointing to materially lower claims handling costs than traditional models. Management noted its automation now covers “most support and claims interactions,” which has implications for both speed and consistency of payouts.

PYMNTS Intelligence in collaboration with Ingo Payments finds that delays in claims payouts continue to affect retention and satisfaction when it comes to insurance, and in our data, 38% of auto insurance customers are in the lowest satisfaction segment when payments lag. The same research emphasizes that speed in disbursements is now tied directly to trust and loyalty. That pressure is pushing insurers to automate processes that were historically manual.

Operating leverage tied to AI is also visible in staffing metrics. Lemonade reports that in-force premium per employee exceeds $1 million, reflecting the ability to scale premium volume without a proportional increase in headcount. Management attributes that to “deeply embedding LLMs within our proprietary technology stack,” which has expanded capacity while reducing team size over time.

Revenue rose 71% year over year to $258 million, while gross profit increased 159% to roughly $100 million.

Porch Group frames AI in similar operational terms. Management stated during the conference call with analysts that AI is producing “real productivity gains,” as discussed by COO Matthew Neagle across engineering, customer support and fraud monitoring. Those gains are reflected in margin performance, with insurance services generating an 85% gross margins.

AI in Distribution and Customer Acquisition

AI is also being applied to marketing efficiency and customer acquisition.

Lemonade highlights its “AI-powered growth engine and proprietary LTV model,” which enables real-time optimization of targeting and capital allocation. CEO Daniel Schreiber reinforced that point on the earnings call, stating that marketing spend has grown, but the loan to value/customer acquisition cost ratios are healthy.

Customer growth figures support that claim. Lemonade added 158,000 customers in the quarter, bringing total customers to more than 3.1 million, up 23% year over year. In-force premium reached $1.3 billion, up 32%, while premium per customer increased 7% to $424. Porch Group’s earnings materials detail that insurance services saw 50% revenue growth as measured year over year during the most recent quarter.

Cross-selling, enabled in part by data and targeting models, is contributing to that expansion. About 18% of total premium is bundled, and existing customers generated roughly $85 million of pet insurance premium. Conversion rates have nearly doubled, according to management, indicating that pricing and targeting improvements are translating into policy issuance.

These figures show that AI is influencing not only how policies are serviced but also how customers are identified and converted.

Underwriting remains the area where AI has the most direct impact on profitability.

Lemonade reports that “over 90% of our customers have continuous telemetry on,” allowing the company to adjust pricing based on real-time data.

The results are visible in underwriting metrics. Lemonade and Porch both reported improving gross loss ratios, as measured year over year. The earnings results show that AI is embedded across multiple parts of the insurance value chain, tied to claims handling, customer acquisition and underwriting.