The Incentive Misalignment
For decades (and centuries) the insurance industry has been hated for obvious reasons. They make money by taking money from users. This inherently is a model ripe for disaster. Insurance companies are looking for every way to not pay a claim even when required. This has caused animosity between the company and consumer. The insurance industry has also been plagued by incessant fraud with customers always trying to squeeze every penny they can from an insurer. Both sides never settling and being suspicious of the other's behaviors.
How Lemonade is Aligning Interests
Lemonade is tackling this dislignment with their culture as well as their business model. Lemonade thrives in marketing and user satisfaction. They try to fight the disconnect between insurers and customers in many ways. Even their logo and branding gives a relaxed and friendly vibe. They have a pink simple logo, with fun cartoon characters all over their site. Unlike the the boring and rigid competitors who's names all have either state or farm or both in it, lemonade tries to make insurance a lovely fruit. Secondly, they have a 3rd party charity program, that gives any dollar they make over a certain percentage go to charity. Not just any charity, but a charity of the customers choosing. This, in game theory, aligns the interests of the company and the consumer. The company is less incentivized to withhold payouts, because they know there upside is limited. At the same time, the consumer is less likely to defraud lemonade, because they know they'll be hurting a charity they hold dearly along with it. Lastly, what allows Lemonade to to really have the freedom to have such high NPS scores. Scores which align with some of the most consumer loved products, such as Tesla and Apple. Other incumbents need to fight for every dollar, because there margins are so tight, they need that extra dollar. Lemonade's expenses are so that they obviously want the extra dollar, but the incentives aren't there for any shenanigans, because there will still be a healthy return even if they don't get it