Lemonade hikes auto rates in Tennessee prior to product launch

Loss trends and competitor rate actions are driving Lemonade Inc. to increase private auto rates in Tennessee before its product even launches.

The homeowners and renters insurtech is entering a new market at a time when private auto insurers are facing a challenging environment with claims severity and frequency trending higher. For a company with no historical loss experience of its own in the auto market, Lemonade looked to competitors to help create its initial rates.

Lemonade settled on using a December 2020 filing from The Progressive Corp.'s Mountain Laurel Assurance Co. subsidiary as the basis for which to set rates in Tennessee. The initial rates were submitted to the state regulator in July 2021 and approved in late October 2021.

Regulators in Tennessee granting double-digit increases

A number of insurers began requesting and receiving double-digit rate hikes in Tennessee in the second half of 2021. Progressive's Mountain Laurel was one of those companies; regulators granted an 11.8% increase on Jan. 19, 2022.

A couple of days later, Lemonade submitted a request seeking to revise its initial rates before a single customer purchased a policy in the Volunteer State. The revision to its initial rate "builds on the trends and rate changes subsequently taken by competitors," and is proposing to boost its initial launch rate by roughly 15%.

Base rate coverage limit changes

The coverage type to receive the largest pricing change for Lemonade was its uninsured motorist property damage coverage, as the insurer seeks to raise that base rate by 38%. Lemonade is also seeking to hike its collision coverage base rate by 33.9%.

Lemonade also mentioned Allstate Property & Casualty Insurance Co. as a competitor within its initial filing. Allstate is pursuing an overall private auto rate increase of 10.5% in Tennessee and is looking to raise its property damage, comprehensive, bodily injury and uninsured motorist coverage rates by double digits in the state.

One notable difference between Lemonade, Progressive and Allstate is with collision coverage. Allstate's base rate is not changing, while both Progressive's Mountain Laurel and Lemonade are requesting, or have already received, at least a 30% increase within the coverage line.

A broader trend

A number of auto insurers have taken steps to raise rates nationwide to help offset elevated claim costs, and it looks likely that trend will continue for the foreseeable future. Lemonade is requesting an effective date of Feb. 15 for new rates in Tennessee. It said the increases will allow it to enter the market both competitively priced and with an adequate rate.