Lemonade Will Cut Tesla Insurance Rates by Up to 50% When FSD Is Driving

Insurance is usually the least exciting part of owning a car. For Tesla drivers, that equation may be shifting.

This week, Lemonade announced it will offer up to 50% lower insurance rates for Tesla drivers when Full Self-Driving is actively steering the vehicle. The move is based on real-world driving data that shows fewer accidents during FSD-assisted miles.

The discount applies to Lemonade’s pay-per-mile insurance. Instead of charging a flat rate based on who you are and where you live, Lemonade prices each mile differently depending on how that mile is driven. To make that possible, the insurer is working directly with Tesla, using vehicle telemetry to separate human-driven miles from those driven under FSD supervision.

That distinction matters. When FSD is engaged, Lemonade’s data shows accident risk drops significantly. According to the company, combining Tesla’s vehicle signals with its own insurance records indicates that FSD-assisted driving is about two times safer than average human driving.

“We’re looking at this in extremely high resolution, where we see every minute, every second that you drive your car,” said Shai Wininger in an interview with Reuters. “We get millions of signals emitted by that car into our systems. And based on that, we’re pricing your rate.”

This approach breaks sharply from how most auto insurance works today. Traditional insurers rely on static factors like age, ZIP code, credit score, and claims history. Once your policy starts, your daily driving habits rarely move the needle unless something goes wrong.

Here, the car’s software plays an active role. FSD brings constant awareness, rapid reaction times, and consistent attention to the driving task, while the driver stays responsible and alert. Lemonade is careful to point out that Tesla’s system remains Level 2 driver assistance, not full autonomy. Human supervision is required at all times, and the discount reflects improved outcomes with that supervision in place.

Even with those caveats, insurers do not cut rates this aggressively without strong data. Tesla already offers its own insurance product with discounts of up to 10% for drivers who use FSD for more than half of their miles. Lemonade’s pricing goes much further and signals growing confidence in Tesla’s safety data from outside the company.

The timing also matters. As advanced driver assistance becomes more common across EVs, insurers face pressure to rethink how they price risk. Treating a Tesla running advanced AI software the same way as a decade-old gas car makes less sense with every software update.

Lemonade’s new Autonomous Car Insurance will roll out first in Arizona on January 26, followed by Oregon in February. The company says additional states are expected as more data becomes available and as Tesla continues releasing safety-focused FSD updates. Lemonade has also indicated rates could drop further if future software versions continue improving outcomes.

For Tesla owners, this reinforces a bigger shift in EV ownership. Software no longer just changes how the car feels to drive. It affects long-term costs in tangible ways. Full Self-Driving already shapes commuting, road trips, and daily traffic stress. Now it may also lower insurance bills.

Source: Reuters