Digital insurance company Lemonade is launching a product for users of Tesla’s advanced driver-assistance system, known as Full Self-Driving (Supervised), which the insurer promises will reduce per-mile rates by “approximately 50%.”
It’s one of the first products aimed at pricing insurance based on how a software system handles driving, and signals a new line of business that companies may consider building as partially or truly autonomous driving becomes more widespread.
Lemonade said Wednesday that it is leveraging “previously unavailable vehicle telemetry data” thanks to a “technology partnership with Tesla,” but the insurer did not provide further details. Lemonade said it has trained a proprietary usage-based risk prediction model to determine when a driver is using full autonomy or operating the vehicle themselves and sets prices accordingly.
Lemonade is calling the new product “self-driving car insurance.” Tesla’s software currently does not allow cars to drive fully autonomously, and drivers must be ready to take over at any time. But the product is clearly a bet that Tesla CEO Elon Musk will finally make good on his long-delayed promise that his company will make it a reality.
“Traditional insurance companies treat Teslas like any other car and AI like any other driver. But a driver who can see 360 degrees, never gets drowsy, and reacts in milliseconds is unlike any other driver,” Lemonade co-founder and president Shai Winninger said in a statement. “Our existing pay-per-mile product brings us something that traditional insurance companies don’t: a unique technology stack designed to collect large amounts of real-world driving data to enable accurate and dynamic pricing.”
The new auto insurance product will go on sale in Arizona on January 26th and in Oregon next month. Lemonade claims that “the more secure the FSD software becomes, the lower the price will be.” The company’s existing auto insurance coverage is available on the “most popular vehicles” in Arizona, California, Colorado, Illinois, Indiana, Ohio, Oregon, Tennessee, Texas and Washington.
Tesla has offered its customers its own auto insurance for years, but in late 2025 the company faced enforcement action from the California Department of Insurance (CDI). The automaker, along with its state insurance partner, was accused of engaging in “significant delays in responding to policyholder claims,” ”unreasonable denials,” and “unfair claims resolution practices.”
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Tesla denies the allegations.
