This Artificial Intelligence (AI) Stock Is Up 89% Over the Past Year. Here's 1 Crucial Metric Investors Will Want to Watch in 2025.

Artificial intelligence (AI) has taken the world by storm and captured people's attention with its transformative potential. The debut of Open AI's ChatGPT showed the world what is possible, and more businesses are looking for ways to incorporate AI to streamline and make their businesses more efficient.

Lemonade (NYSE: LMND) is at the forefront of AI-driven disruption in the insurance industry. The company streamlines the entire customer experience by employing AI chatbots, from obtaining quotes and purchasing policies to efficiently and quickly settling claims.

Lemonade has increased its areas of coverage and has expanded rapidly, which has fueled significant growth in its policies in force in recent years. However, it has struggled with profitability, resulting in considerable volatility in earnings and its stock price.

The company continues to refine its AI models and has made notable progress in recent quarters. Here's what investors will want to pay close attention to moving forward.

Lemonade is taking on a huge industry with numerous big players that have decades of experience underwriting policies. The company has an ambitious goal of upending the legacy insurers by using AI and machine learning to streamline and expedite the insurance process, making it more efficient and customer-friendly.

One of its top features is its AI-powered claims processing system, led by its chatbot, AI Jim. The system assesses claims, checks policy conditions, and uses anti-fraud policies to evaluate and settle claims quickly and efficiently. It also has another chatbot, AI Maya, which handles customer inquiries. Lemonade hopes to significantly reduce overhead and operational costs by leveraging AI.

Lemonade looks to disrupt the industry, but it's no easy task. Several factors make it difficult for newer entrants, including capital, regulatory hurdles, and competitors with decades of built-up data and technological investments. It also takes companies time to accurately access and price risks and dial in risk models to ensure they price policies and manage risks effectively.

Early on, Lemonade focused on renters' insurance as it targeted young adults, hoping to turn them into lifelong customers. Since then, it has rolled out homeowners' insurance along with pet, life, and automotive coverage. Over the past two years, the company's in-force premium, or the amount of active policies, has grown from $609 million to $889 million, or 45%, and it now has 2.3 million customers.