Earlier this week, the company launched its new Lemonade Autonomous Car insurance business.
The company will collaborate with Tesla, giving drivers using FSD a 50% lower per-mile rate.
This partnership fits perfectly into Lemonade’s AI-powered insurance operations and gives it a head start in a potentially massive niche.
Shares of AI-powered insurer Lemonade (NYSE: LMND) are up 23% this week as of 1 p.m. ET on Thursday following news of a first-of-its-kind deal with Tesla. Lemonade offers renters, pet, homeowners, and life insurance, but this week’s move is ties to its car insurance unit. On Wednesday, the digital insurer announced the launch of Lemonade Autonomous Car insurance. The new unit’s first customer will be Tesla, and owners using the company’s full self-driving (FSD) capabilities.
Image source: Lemonade.
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This collaboration will see Lemonade provide a 50% drop in per-mile rates while Tesla owners have FSD engaged. Lemonade will gather data on this FSD usage, which it can plug into its models to compare risk differences between autonomous driving and human drivers. This collaboration makes Lemonade the first insurer to try to tackle the notion of insuring autonomous driving. Tesla’s latest FSD safety report shows that when FSD is engaged, accidents are seven times less likely than the U.S. average for a human driver. The partnership is a bet that these lower accident rates will not only boost profits up front, but also likely improve profitability over time as Tesla updates its technology, giving Lemonade a valuable head start in the burgeoning niche.
Following this week’s rise, Lemonade is now up over 600% since 2023.
However, despite this incredible run, there is still a lot to like about the stock. Lemonade:
Lemonade now trades at 13 times sales, which is a steep premium over traditional insurers. However, its accelerating premium growth and improving efficiencies prove its AI-powered vision remains on track to reimagine the insurance industry.
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Josh Kohn-Lindquist has positions in Tesla. The Motley Fool has positions in and recommends Lemonade and Tesla. The Motley Fool has a disclosure policy.
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