Morgan Stanley Weighs In on Tesla Stock as Insurer Puts Money Behind FSD Safety

Tesla (NASDAQ:TSLA) has regularly stressed that its Autopilot and FSD (Supervised) systems help prevent accidents, and now it seems a third party might have independently confirmed that claim.Claim 50% Off TipRanks PremiumUnlock hedge fund-level data and powerful investing tools for smarter, sharper decisions Stay ahead of the market with the latest news and analysis and maximize your portfolio's potential Last week, U.S. insurer Lemonade introduced a new "Autonomous Car" insurance product that provides an impressive 50% discount on premiums for every mile driven with Tesla's FSD (Supervised) engaged. This is a development that should not be overlooked, says Morgan Stanley's Andrew Percoco, an analyst ranked among the top 3% on Wall Street. "Lemonade's newly announced autonomous car insurance product represents a notable step in legitimizing autonomous driving, and in particular, Tesla's FSD (full self-driving) technology, in the eyes of the insurance industry," the 5-star analyst said. Percoco thinks Lemonade's approach points to increasing confidence in the quality and relevance of data generated by Tesla's fleet, placing greater weight on observed real-world driving outcomes when assessing safety, rather than depending exclusively on theoretical models or regulatory classifications. Beyond direct cost benefits, the design of the policy might also support broader FSD usage and adoption. By lowering insurance premiums, it creates an ongoing economic incentive for drivers to use FSD more frequently, further "reinforcing Tesla's overall value proposition." "Over time," Percoco expounded, "as FSD adoption accelerates we expect a positive feedback loop, whereby miles driven correlates to improved performance and safety, and further reductions in insurance costs." In a broader context, the analyst believes Lemonade's announcement signals a future where insurance could serve as "one of the clearest market-based validators of autonomous driving progress." As insurers begin to factor increasingly detailed driving data into their pricing models, technologies that clearly lower risk are likely to receive recognition more quickly and with greater transparency. "For Tesla," Percoco added, "this marks another step toward external recognition that FSD is moving from an experimental feature to an economically relevant safety system." Percoco reckons that there are around 1 million active Tesla FSD subscribers on US roads, representing roughly 1 in every 300 vehicles. This growing population generates a unique, high-quality dataset that the insurance industry can leverage to more accurately price auto P&C risk. Autonomous driving is expected to meet a significantly higher safety standard than human driving, and until now, the limited availability of safety data has hindered the insurance industry's ability to validate the technology. "In our opinion," the analyst summed up, "as insurance companies begin to price autonomous driving risk anywhere near the price of human driving risk we believe this creates a strong tailwind for autonomous propagation into the market." However, while Percoco highlights the announcement's importance, it is not enough to shift his overall TSLA stance. The analyst remains on the sidelines with an Equal-weight (i.e., Neutral) rating, while his $425 price target points toward a 12-month decline of ~2%. (To watch Percoco's track record, click here) The Street's general take is a similar one; based on a mix of 10 Buys, 8 Holds and 7 Sells, the stock receives a Hold consensus rating. At $398.38, the average target suggests the stock is overvalued by 8.5%. (See TSLA stock forecast)