New York-headquartered insurance provider Lemonade launched on Wednesday the ‘Autonomous Car’ solution, citing Tesla drivers using the Full Self Driving software as the first target.
The insurer said it collaborated with the Elon Musk-led company to analyze vehicle driving data, which was then integrated into its usage-based risk prediction models.
Savings on rates of miles driven while using Tesla’s FSD software reach “approximately 50%.”
Lemonade’s co-founder and President Shai Wininger said the company concluded that vehicles driven with FSD “are involved in far fewer accidents.”
“Traditional insurers treat a Tesla like any other car, and AI like any other driver,” Wininger noted. “But a car that sees 360 degrees, never gets drowsy, and reacts in milliseconds can’t be compared to a human.”
The news comes just a week after the Elon Musk-led company announced that, from February 14, customers would no longer be able to buy the software outright.
Tesla will offer the software only through a subscription, which costs $99 per month in the US, as the company works to increase FSD adoption.
Autonomous Car Insurance
Lemonade’s Autonomous Car Insurance will start rolling out in Arizona on January 26 and in Oregon “a month later.”
Its existing car insurance, already based on a pay-per-mile system, will continue to be available for most models—including Teslas — in Arizona, California, Colorado, Illinois, Indiana, Ohio, Oregon, Tennessee, Texas, and Washington.
The policy supports intermittent FSD use and households with more than one Tesla vehicle (including standard non-FSD vehicles), all on a single policy.
“Beyond the product announcement today, we’re also announcing our commitment to the Tesla community,” the company’s President said, explaining that “the safer FSD software becomes, the more our prices will drop.”
Tesla‘s FSD is currently on Version 14, receiving weekly updates to introduce either new features or improvements to the software.
Earlier this month, the company’s VP of Software AI Ashok Elluswamy said that the company has begun rolling out “reasoning” features ahead of the V14.3 series.
Musk previously stated that “by v14.3, your car will feel like it is sentient.”
Insurance for Self-Driving
According to S&P Global research published last September, insurance rates are expected to decline for both commercial fleets and personal consumers as autonomy progresses.
However, the product itself will need a fundamental restructure, not just pricing adjustments.
For example, when a vehicle with Level 3 to 5 autonomy is involved in a crash, as it allows the driver to not be constantly engaged, “fault no longer rests with the driver” but should “shift to the OEM or software provider.”
Future policies will have to “distinguish coverage based on whether the vehicle was under human control or operating in autonomous mode at the time of an incident.”
At the same time, the New York-based firm says “robotaxis will generate far more miles traveled — up to 52,000 miles per year per vehicle — shifting the insurance model from per-vehicle to per-mile exposure.”
Both these concerns are allegedly taken into account in Lemonade’s Autonomous Car insurance pack.
Other changes include fewer claims but higher repair costs, which is a trend also seen with the introduction of electric vehicles.
Late last week, Rivian founder and CEO RJ Scaringe was a guest on the Access podcast, where the discussion touched on insurance rates for autonomous vehicles compared to those for human-driven cars.
When questioned whether insurance companies, seeing that autonomous driving is statistically much safer, would underwrite it, Scaringe said he expected it to be “one of the driving forces” towards automation.
Noting that 99% of the 10 trillion miles driven annually in the US are “in assets and vehicles that we own,” Scaringe agreed that people will increasingly switch to ride-sharing as it becomes more accessible, particularly with robotaxis reducing costs.
However, he doesn’t think “car ownership is going to fall that dramatically in the US.”
As of press time, Lemonade shares on the New York Stock Exchange were trading 7% higher at $83.74 on Wednesday morning.
The insurance company has a market cap of over $6.2 billion.
Tesla, currently valued at over $1.4 trillion, was trading nearly 2% higher at $427 as of press time.
