U.S. insurer Lemonade said it will reduce insurance rates for Tesla electric vehicle drivers who use the automaker’s Full Self-Driving driver assistance software while it is actively steering the vehicle. The company announced the move on Jan. 21, citing data that it says shows a reduction in accidents when the software is in use.
Lemonade said the rate cut will reach 50% for eligible drivers enrolled in its pay-per-mile insurance product. The new offering will launch in Arizona on Jan. 26, followed by Oregon in February.
Use of Vehicle Telemetry Data
The rate reduction is based on Lemonade’s access to Tesla vehicle telemetry data as part of a collaboration between the two companies. According to Lemonade, the data allows the insurer to distinguish between miles driven while Full Self-Driving, or FSD, is active and miles driven solely by a human driver.
Lemonade co-founder Shai Wininger said the insurer receives detailed driving data from Tesla vehicles, including signals emitted every second. He said Lemonade uses that information, combined with its own insurance data, to price coverage.
Wininger said the data showed that driving with FSD engaged made driving about twice as safe for the average driver. He did not disclose specific details about the data Tesla provided. He also said the agreement did not involve any payments between the insurer and the automaker.
Autonomous Car Insurance Offering
Lemonade said the new product will be called Autonomous Car insurance. The offering reflects broader efforts by insurers to adapt pricing models as automakers deploy advanced driver assistance and semi-autonomous features.
Tesla’s FSD software is categorized as Level 2 autonomy. It requires active driver supervision and allows vehicles to operate on highways and city streets. Most automakers currently offer Level 2 systems for personal vehicles, which require drivers to remain attentive and in control at all times.
Lemonade’s rate cut applies only when the software is steering and does not reflect fully autonomous driving. Wininger said the discount reflects improvements in driver safety when using the technology rather than the system operating independently.
Regulatory and Safety Context
Tesla’s driver assistance technology has drawn scrutiny from regulators and safety experts. The U.S. auto safety regulator has investigated several crashes involving vehicles using FSD and continues to examine reports of traffic violations linked to the software.
Tesla’s approach differs from many competitors by relying primarily on cameras and artificial intelligence rather than additional sensors. That design choice has raised concerns about performance limitations, particularly during poor weather conditions.
Despite those concerns, Lemonade said it plans to further reduce rates as Tesla releases FSD software updates that improve safety performance.
Industry Implications
Tesla already offers its own insurance program, which includes a monthly discount of up to 10% for drivers who use FSD for more than half of their miles driven.
Lemonade’s announcement highlights ongoing challenges for insurers as they seek to price coverage for vehicles equipped with increasingly advanced driver assistance systems. As automakers continue to expand these technologies, insurers are evaluating how data, driver behavior, and software usage factor into underwriting and risk assessment.