The news: Lemonade is launching Autonomous Car insurance, which will initially cover Tesla vehicles using Full Self-Driving mode. The rollout will begin in Arizona, followed by Oregon in February. The product incorporates Tesla software information, sensor precision, and other telemetry into Lemonade’s usage-based risk models.

Zoom out: Telematic, or usage-based, auto insurance is a mainstream product offered by legacy insurers including Nationwide, Safeco, Travelers, Progressive, and GEICO. Most auto insurance premiums are calculated based at least in part on traditional factors like zip code and claims history; thematic data now plays a much larger role.

Connected cars make it increasingly easy for insurers to access telematics data. And with 203.0 million US connected car drivers expected by 2029, that data opportunity will be vast. The rise of autonomous and semi-autonomous driving will in turn make telematics data richer—and more important to pricing risk.

But widespread autonomous driving will also make liability issues an increasingly large problem: It’s not always clear who is ultimately responsible for a crash when the car itself is driving, even if the driver is responsible for closely monitoring the car’s autonomous behavior.

Implications for insurers: Lemonade’s product and partnership with Tesla augments trends in telematic insurance by pricing risk according to consumers’ computer-assisted driving habits and supporting software and systems. In our December 2025 report Insurance Trends to Watch in 2026, we predicted that telematic insurance would become a standard product as consumers look for ways to lower their auto premiums. We expect to see insurers expand partnerships with automakers to get better data from connected vehicles as they sell more usage-based auto policies.