A New York man seeks class-action status for his lawsuit claiming that digital insurer Lemonade is unlawfully collecting customer's biometric data.
Mark Pruden, of Queens, purchased a renter's policy from Lemonade on Jan. 25, 2021. In late May, Pruden filed a claim for a lost piece of jewelry worth $3,500, court documents say.
The Lemonade model utilizes artificial intelligence chatbots and Pruden was connected with one named "AI Jim," who recorded the details of the claim.
"AI Jim asked Plaintiff to sign a pledge confirming that the information provided is '100% true and accurate,'" the lawsuit reads. "Following signing of the pledge, AI Jim asked Plaintiff to 'record a short video of [Plaintiff] describing the incident.'"
Pruden assented and recorded a 47-second video explaining the details of the jewelry loss. His claim was approved 10 days later. But Pruden alleges that the video was unlawfully used by Lemonade to harvest data.
"The unlawfully collected biometric data contained personal information, including Plaintiff’s face geometry and/or voiceprint, and was collected without Plaintiff’s knowledge or authorization," the lawsuit reads.
The lawsuit follows a series of since-deleted tweets from May in which Lemonade said it uses artificial intelligence to analyze its customers' claims submission videos for signs of fraud, the legal journalism site Law360 reported. By picking up "non-verbal cues," the insurer said in one tweet, it could pick up on cues that carriers without digital claims processes would miss.
The insurer clarified its stance after members of the public expressed concern over whether the carrier's use of AI could be used to deny claims based on the race, gender, disability or general physical appearance of a policyholder, Law360 noted.
A Different Insurance Company
Founded in 2015, Lemonade Inc. offers renters' insurance, homeowners' insurance, pet insurance and term life insurance in the United States. The company is based in New York City and has approximately one million customers, according to its annual report with the Securities and Exchange Commission. Seventy percent of its customers are under the age of 35.
Lemonade keeps a flat 25% fee of a customer's premium while setting aside the remaining 75% to pay claims and purchase reinsurance giving it less of an incentive to deny claims or make smaller payouts.
The company is registered as a public benefit corporation and has a stated mission of ‘transforming insurance from a necessary evil into a social good."
On its website and in marketing materials, Lemonade touts its ability to extract 1,600 data points about a customer by asking only 13 questions, which Lemonade claims is one hundred times more than what other insurance carriers can do, the lawsuit noted.
Pruden is asking the court to certify his lawsuit as a class action on behalf of all other similarly affected customers. His lawsuit asks the court to order Lemonade to stop collection of data and for unspecified compensatory and other damages.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected] Follow him on Twitter @INNJohnH.
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