TLDRs;
- California regulators accuse Tesla Insurance of major claim delays and widespread consumer violations.
- Complaints against Tesla Insurance jumped from 83 in 2022 to nearly 1,500 by 2025.
- Officials say Tesla and State National ignored warnings, putting profits above policyholder protection.
- Tesla faces fines up to $10,000 per violation and possible license suspension.
The California Department of Insurance (CDI) has launched enforcement actions against Tesla Insurance Services and Tesla Insurance Company following a dramatic rise in consumer complaints alleging delays, denials, and unfair claim practices.
Regulators also included State National Insurance Company, a Tesla partner, in the ongoing probe.
According to the CDI, both firms engaged in conduct that violated California’s claims-handling laws, causing policyholders to face financial distress while waiting for compensation.
“Consumers were left stranded by systemic failures that prioritized profits over people,” said the department in its Friday announcement.
The department recorded 1,481 complaints and nearly 3,000 violations as of September 2025 — a staggering increase from just 83 complaints in 2022. Officials said Tesla Insurance has 15 days to respond or face penalties of up to $10,000 per willful violation.
Tesla’s Insurance Expansion Faces Scrutiny
Tesla Insurance, launched in 2019 to offer affordable policies for Tesla drivers, was initially seen as a key pillar of the company’s vertical integration strategy, combining vehicle, software, and financial services under one ecosystem. However, regulators now say that Tesla’s rapid expansion has outpaced its operational capacity.
After acquiring Balboa Insurance Company in 2022 and rebranding it as Tesla Insurance Company, the automaker promised faster claims processing using its real-time vehicle data. Yet, according to CDI reports, customers have experienced the opposite, slower payouts, unanswered calls, and incomplete investigations.
Complaints surged again in 2024, even after Tesla pledged to increase staffing and improve systems following meetings with regulators in 2023.
“Despite repeated warnings and commitments to correct deficiencies, the violations persisted,” the department said.
Violations Paint a Troubling Picture
CDI investigators uncovered multiple violations of California’s insurance laws by Tesla Insurance.
They documented 396 cases where the company failed to respond to customer inquiries within 15 days.
Another 22 cases involved delays in accepting or denying claims beyond the 40-day legal limit.
Investigators also found 10 incidents where claimants were forced to travel excessive distances for inspections or replacements.
Regulators said such patterns demonstrate “a disregard for statutory timelines and consumer rights.” Many customers reported being unable to reach adjusters or obtain updates, leaving them without coverage for repairs or rentals for weeks.
Tesla Insurance’s alleged failures were not isolated errors but systemic breakdowns in operations, the report added. Despite acknowledging staffing shortages, Tesla continued to fall behind on claim processing and investigations.
What Comes Next for Tesla Insurance
The California Department of Insurance confirmed that both Tesla Insurance and State National now face an administrative hearing that could lead to suspension or revocation of their licenses in the state. Unless the companies resolve the violations within the 15-day window, the case will move before an administrative law judge.
If found liable, Tesla could face millions in cumulative fines and risk losing access to California’s vast auto insurance market. Such a move would deal a significant blow to the company’s ambitions of building an integrated ecosystem spanning vehicles, energy, and financial services.
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