Insurance provider Lemonade Inc. (NYSE:LMND) has said that it will offer a 50% rate cut for Tesla Inc. (NASDAQ:TSLA) drivers when the automaker's Full Self-Driving (FSD) system is engaged, as it can reduce accidents, the company shared.

Lemonade Cuts Rates

Lemonade will cut "per-mile rates for FSD-engaged driving by approximately 50%," the company said in a statement on Wednesday, adding that rates could go down further in the future. The company, which collaborated with Tesla to unveil its "autonomous car insurance," announced the rate cuts after accessing FSD data "that was previously unavailable," it said.

"Teslas driven with FSD are involved in far fewer accidents," Lemonade co-founder Shai Wininger said in the statement, adding that "a car that sees 360 degrees, never gets drowsy, and reacts in milliseconds can't be compared to a human."

Elon Musk, Chamath Palihapitiya React

Reacting to the news, Tesla CEO Elon Musk took to the social media platform X, hailing the collaboration between the two companies. "Insurance is half price when Tesla self-driving is activated, because it increases safety so much," Musk said in the post on Wednesday.

Social Capital co-founder Chamath Palihapitiya also weighed in on the news, sharing that the decision to introduce FSD-engaged rate cuts could make insurance companies "start to look more financially predictable" with lower premiums and lower payouts. "This will flow through to reinsurers as well," the investor said.

Elon Musk's FSD Claims, Sam Altman's Questions

The news comes as Musk recently shared that Tesla vehicles equipped with the AI4 (HW4) chip will be able to run Unsupervised FSD without any additional upgrades to the chip. Musk said that the AI4 chip would achieve “self-driving safety levels very far above human."

However, questions have arisen about the safety of Tesla's autonomous systems, with numerous lawsuits against the automaker that allege the system caused fatalities. NHTSA, too, has launched a probe into the system following reports of incidents involving Tesla vehicles with autonomous driving engaged.

OpenAI co-founder and CEO Sam Altman also recently questioned the safety of the systems. "Apparently more than 50 people have died from crashes related to Autopilot," Altman said amid a feud between him and Musk over OpenAI's non-profit mission. Musk is credited as one of OpenAI's co-founders.

According to Benzinga Edge Rankings, Tesla scores well on the Quality and offers a favorable price trend in the Long term.

Price Action: TSLA rose 2.91% to $431.44 at Market close on Wednesday, and further gained 0.63% to $434.15 during the after-hours session.

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