Tesla Insurance Accused of Delays and Failures by California Regulator
Tesla Faces Enforcement Action Over Insurance Claim Practices
California’s Department of Insurance (CDI) has initiated enforcement proceedings against Tesla due to consistent instances of denying or delaying customer claims, despite prior warnings issued by the state regulatory body.
Unfair Claims Settlement Practices Alleged
Tesla’s insurance division, in conjunction with State National Insurance Company, is accused of engaging in “willful unfair claims settlement practices.” These practices include “significant delays in addressing policyholder claims at every stage” of the process and “unjustified claim denials,” as stated by the CDI.
Such actions have reportedly resulted in “financial detriment” and “emotional distress for policyholders.”
Escalating Complaints and Violations
The CDI initially contacted Tesla regarding these concerns in 2022. However, the regulator asserts that the situation has deteriorated. “In 2025, the Tesla Companies have already recorded a higher number of complaints, more substantiated complaints, and committed a greater volume of violations than observed throughout the preceding three years collectively,” the CDI reported.
Potential Penalties
Tesla and State National could be subject to financial penalties of up to $5,000 for each “illegal, unfair, or misleading action” and up to $10,000 for each “intentional” violation, according to the filings. The companies are given a 15-day timeframe to submit a response.
Possible Legal Repercussions
This enforcement action may trigger further legal challenges for Tesla. A proposed class action lawsuit alleging intentional delays and minimized claim payouts was filed against the company in July. The CDI indicated Friday that Tesla’s conduct could create “potential exposure to liability from third parties.” Tesla and State National have not yet issued a comment in response to this matter.
Initial Launch and Early Issues
Tesla introduced its proprietary insurance product in 2019, aiming to provide lower premiums and expedited service. The initial rollout, however, was problematic.
The website experienced frequent outages, and when accessible, quotes were often higher than anticipated by vehicle owners. Despite these challenges, Elon Musk predicted the product would be “revolutionary.”
Regulator Concerns Emerge
Just three years later, the CDI observed a “noticeable increase in consumer complaints related to claims” against Tesla. Consequently, in December 2022, the CDI initiated meetings with representatives from Tesla and State National.
Staffing and Reporting Deficiencies
During these meetings, the regulator discovered that the position of Tesla’s “Head of Claims” had remained unfilled for several months. Furthermore, the companies were accused of failing to report the identified claims-handling issues.
Probationary Period and Promises of Improvement
As a result, the CDI placed Tesla and State National under a probationary period, monitoring their efforts to rectify these violations for six months. Tesla and State National “acknowledged” that they had underestimated the claim volume and the necessary staffing levels, and pledged to increase their hiring efforts.
It wasn't until April 2023 that Tesla appointed a new Head of Claims. Throughout the remainder of the year, Tesla and State National “reported enhancements in the quality” of their claims processing and the “resolution of consumer grievances.”
Reuters Investigation Reveals Ongoing Problems
Later in the same year, a Reuters investigation into Tesla’s insurance operations suggested that improvements were not as substantial as reported.
Renewed Concerns in 2024
The CDI reached a similar conclusion in 2024, noting a “substantial rise” in both consumer complaints against Tesla and “violations of the law.” The number of complaints received by the CDI jumped from 83 in 2022 to 829 in 2024.
In 775 of these cases, the CDI determined that Tesla had violated California’s insurance code.
Continued Deterioration in 2025
The situation has continued to worsen, according to the CDI. As of September 22 of this year, the regulator has received 1,481 complaints against Tesla and identified 1,969 violations of the state’s insurance code.
Cumulative Violations
Since 2022, the CDI states that Tesla has accumulated nearly 3,000 violations of state insurance law. The majority of these violations relate to Tesla’s failure to respond to customers within the legally mandated 15-day period. The CDI also identified 166 instances where Tesla failed to conduct a “thorough, impartial, and objective investigation” of a claim.
“CDI consistently informed [Tesla] of its claims-handling deficiencies and legal violations,” the regulator stated. “Despite [Tesla’s] repeated commitments to improvement, the number of justified complaints and violations continued to increase, demonstrating [Tesla’s] inability to correct its practices.”