Tesla Insurance Under Fire by California Regulator
Tesla’s insurance business is facing major scrutiny from California’s Department of Insurance (CDI). The regulator has filed enforcement actions against Tesla and its partner, State National Insurance Company, for delaying or denying customer claims repeatedly. This follows years of warnings from CDI.
Key Points from the Filing:
- Tesla and State National allegedly engaged in “willful unfair claims settlement practices.”
- Customers experienced “egregious delays” at all steps of claims processing.
- Many claims were “unreasonably denied,” causing “financial harm” and stress to policyholders.
Rising Complaints and Violations
CDI first raised concerns about Tesla in 2022. However, the regulator claims the situation worsened in 2025:
- More complaints were filed in 2025 than in the previous three years combined.
- Tesla could face fines of up to $5,000 for each “unlawful or unfair act” and $10,000 for “willful” violations.
- Tesla has 15 days to respond to the enforcement action.
This regulatory action may also trigger legal consequences, as Tesla already faces a proposed class-action lawsuit over delays and underpayments in claims. CDI warned that the company could face “third-party liability exposure.”
Tesla Insurance: A Rocky Start
Tesla launched its in-house insurance in 2019, promising lower premiums and faster service. But early problems emerged:
- The website often crashed, frustrating users.
- Many quotes were higher than expected, disappointing potential customers.
- Tesla CEO Elon Musk had called the product “revolutionary,” but implementation struggled.
By December 2022, CDI noticed an increase in consumer complaints and began monitoring Tesla and State National. The regulator also found issues in staffing and leadership:
- The Head of Claims position was vacant for months.
- The companies failed to report claims-handling problems to the regulator.
Temporary Oversight and Short-Term Improvements
To address these problems, CDI placed Tesla on a probationary monitoring period for six months. During this time:
- Tesla admitted it had underestimated claim volumes and staffing needs.
- A new Head of Claims was hired in April 2023.
- Tesla and State National reported improvements in claims handling and resolving complaints.
However, the improvements were short-lived. A 2024 investigation by Reuters and follow-up by CDI showed complaints rising sharply.
Exploding Complaints and Continued Violations
The numbers tell the story of a worsening problem:
- Complaints rose from 83 in 2022 to 829 in 2024.
- CDI found violations in 775 cases in 2024 alone.
- By September 22, 2025, 1,481 complaints were filed against Tesla.
- Total violations since 2022 reached nearly 3,000, mostly for failing to respond within the mandatory 15-day period.
CDI also noted 166 cases where Tesla failed to conduct a “thorough, fair, and objective investigation” into claims. The regulator criticized Tesla for repeatedly committing to improvements but failing to correct its practices.
Impact on Customers and Legal Outlook
- Customers have faced financial loss and stress due to delays or denials.
- Tesla’s reputation in the insurance market is under threat.
- Legal exposure may grow if class-action lawsuits proceed.
CDI’s strong enforcement action signals that regulators will continue to hold Tesla accountable unless meaningful and lasting improvements are made in their claims-handling system. Tesla’s insurance troubles in California highlight ongoing consumer protection issues and regulatory pressure. Despite promises and temporary improvements, the company’s repeated failures have left policyholders frustrated and may lead to heavy penalties.
