Jefferies analysts said Tesla Insurance’s Full Self-Driving (FSD) pricing, which could offer better rates based on a car’s performance in FSD through its safety score, poses a potential competitive risk to Lemonade’s auto insurance ambitions as the model size expands.
Recent filings show that Tesla has eliminated the FSD standalone discount offered through its own operator, Tesla Property & Casualty, Inc., and instead fully embeds the autonomy within its safety score framework, meaning pricing reflects the vehicle’s actual performance.
Under Tesla’s model, Autopilot is indirectly rewarded because if it reduces emergency braking and other risk signals, your safety score improves, but if it doesn’t, Autopilot doesn’t offer an explicit price discount.
In comparison, Lemonade considers FSD to be safer on average and reflects this with a per-mile pricing advantage for autonomous use. Regardless of or where FSD is used, this approach assumes a low risk of loss and may lead to cross-subsidization of undesirable autonomous use.
Analysts at Jefferies estimate that the potential for discounts or lower premiums for good drivers is higher under Tesla’s new pricing model than the Lemonade’s FSD pricing, although the reverse is also true.
In theory, Jefferies believes Tesla’s pricing approach could become a competitive risk for parts of Lemonade’s car business over time. However, the two products differ in that Lemonade’s offering may be more targeted at lower-mileage drivers, given its pay-per-mile structure, and may appeal to those looking for an easier, more predictable way to use their points autonomously. Additionally, despite the mileage cap, Lemonade FSD products offer greater stability due to the averaging of autonomous scores.
While Lemonade’s FSD product highlights how autonomy improves average safety, analysts believe that tying discounts to hypothetical gains rather than observed outcomes could lead to higher loss rates over time compared to other approaches.
Tesla Insurance recently reported strong results for 2025, with premiums of $1 billion, up from approximately $315 million in 2024 and $110 million in 2023. This compares to $1.2 billion for Root and $137 million for Lemonade. Tesla reported a combined ratio of 115%, an increase of about 10 percentage points from 125% in 2025. Two of Tesla’s three insurance entities will be profitable in 2025, with the larger third realizing losses (mostly concentrated in CAs that don’t allow telematics).
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