Lemonade Will Insure Tesla’s Self-Driving Cars. Does That Make LMND a Robotaxi Stock to Buy?

Lemonade (LMND) is in the news after announcing the development of a new insurance policy for self-driving cars, beginning with the Full Self-Driving (FSD) system offered in Tesla (TSLA) vehicles. The news was met with an immediate reaction in the stock market. LMND stock saw an uptick in shares — up 9% on Jan. 21 and 13% on Jan. 22 — as did Tesla stock.

The most prominent part of the announcement was impossible to overlook: Lemonade is promising to decrease its per-mile rates by about 50% with FSD enabled, based on data that demonstrates accident rates decrease substantially with FSD mode engaged. Additionally, Lemonade anticipates that its insurance premiums will continue to decrease as Tesla improves its FSD software packages in future releases. Simply stated, Lemonade is betting that improved autonomy translates into decreased risk that it will be able to accurately assess for their policyholders.