California regulators have threatened to revoke Tesla Insurance’s license to sell auto coverage in the state following thousands of customer complaints about the company’s claims handling.
In a strongly worded press release, the California Department of Insurance (CDI) charged that Tesla Insurance and its underwriter, State National Insurance Company, failed to address repeated warnings from regulators.
“Instead,” the CDI alleged, the companies “chose to abandon their responsibility to consumers and persist with their non-compliant claims-handling practices, placing profits above people and flouting the law with impunity.”
Since 2022, the CDI’s claims services bureau (CSB) has received 2,460 complaints from Tesla Insurance policyholders, many of them Tesla owners. Following investigations into the complaints, the CSB found that the insurers violated state insurance regulations 2,568 times.
Tesla and State National have 15 days to respond to the CDI’s Oct. 3 notice of enforcement action.
Claims mishandling at the heart of regulators’ action
In its enforcement notice, the CDI cited a laundry list of violations stemming from customer complaints. The alleged violations included failing to respond to policyholder inquiries, provide written updates, pay claims, and deny or accept a claim within legally required time frames.
The CDI also noted more than 150 instances when Tesla or State National failed to investigate claims thoroughly, fairly, and objectively. In some cases, the insurers required policyholders who filed a claim to “travel an unreasonable distance or wait an unreasonable period of time” to inspect damaged vehicles, get repair estimates, inspect a replacement vehicle, or get a vehicle repaired at a specific facility.
In one case, the insurer failed to pay for completed work within 10 days of receiving an itemized bill or invoice, the CDI said.
What’s next? More trouble for Tesla Insurance
Tesla and State National’s “incompetency, untrustworthiness, and misconduct … constitute grounds for the Insurance Commissioner to suspend or revoke their licenses,” the CDI said in its announcement of the enforcement action.
Additionally, both insurers could face fines ranging from $5,000 to $10,000 for each violation — potentially adding up to $12.8 million to $25.6 million.
Californians buy the most Teslas of any state, according to the World Population Review. Tesla accounted for approximately 53% of California’s electric and hybrid vehicles market in 2024, down 7.6% from the year before, according to a California New Car Dealers Association analysis of Experian Automotive data.
In July, a group of Tesla Insurance policyholders filed a class action lawsuit against the insurer. The suit alleges that Tesla delayed, failed to investigate, and failed to process and settle damage claims.
