California’s insurance regulator has issued enforcement actions against Tesla Insurance Services and Tesla Insurance Company, citing repeated failures to address policyholder claims.
The action also names State National Insurance Company, which may face additional penalties. The company is Tesla’s former underwriter in California.
The California Department of Insurance (CDI) said that the companies did not comply with claim-handling requirements, despite multiple warnings. The department also said the insurers prioritized profits over policyholder needs.
The companies have been directed to address outstanding claims or face a hearing before an administrative law judge. Possible outcomes include suspension or revocation of their licenses to operate in California, as well as significant fines. The companies have 15 days to respond to the department’s accusations.
The companies could face fines of up to $5,000 for each unlawful, unfair, or deceptive act, and up to $10,000 for each willful violation.
The department began noting an increase in complaints related to claims handling in August 2022, specifically involving State National Insurance Company. According to the department’s filing, consumers reported difficulties contacting State National to submit or follow up on claims, as well as delays in claim resolution.
Following meetings with State National and Tesla Insurance Company, the insurers acknowledged underestimating staffing needs and claim volumes. They committed to addressing the issue, but complaints increased again in 2024. The department noted that at least three individuals held the position of head of claims between April 2023 and May 2025.
The department documented violations over the past three years, including 396 failures to respond to inquiries within 15 days, 22 failures to accept or deny claims within 40 days, and 10 instances where claimants were required to travel unreasonable distances or wait excessive periods for replacements, inspections, repair estimates, or repairs. These incidents occurred between July 31, 2024, and September 22.
The department said, “As they previously did – and despite [the Consumer Services Division’s] warning – respondents and [the insurance company] concede that they have not been able to keep staffing on pace and acknowledge that they are responsible for the staffing shortfall.”
Regulators also cited delays and denials in claim payments, as well as failures to conduct fair investigations. The companies did not inform policyholders of their right to have denials reviewed by the department, which the regulator described as an important consumer protection.
This year, Tesla made a significant shift by moving to self-underwriting for its insurance policies in California. This transition marked the first time the company would fully manage its own insurance since launching Tesla Insurance in 2019, aiming to gain more control over pricing, claims, and repair costs.
It is worth noting that Tesla’s insurance carriers reported a net underwriting loss of $42 million in the first nine months of 2024, despite growth in written premiums. The company’s expansion efforts have faced setbacks, and the transition to self-underwriting is seen as a potential step toward improving its financial standing in the long run.
Tesla’s insurance model has also faced criticism and legal challenges. A class-action lawsuit in California alleges that some drivers were overcharged based on inaccurate vehicle safety data, raising questions about the accuracy and fairness of Tesla’s insurance pricing.
The company has yet to make its insurance business profitable. In response, Tesla recently hired a former GEICO executive to lead efforts to lower premiums for Tesla drivers and address persistent concerns about insurance costs.
Insurance Commissioner Ricardo Lara’s office described the case as an example of the department’s process for reviewing consumer complaints, seeking resolution, and pursuing legal action when companies do not adequately address claims.
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