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Tesla’s insurance division has been criticized by California regulators for ‘severe delays’ and ‘widespread shortcomings’

Tesla’s insurance division has been criticized by California regulators for ‘severe delays’ and ‘widespread shortcomings’

Bitget-RWA2025/10/04 19:06
By:Bitget-RWA

California’s Department of Insurance (CDI) has taken enforcement action against Tesla, accusing the company of habitually rejecting or delaying customer claims, despite repeated warnings from the regulator over several years, according to newly released documents.

According to CDI, Tesla’s insurance division and its collaborator, State National Insurance Company, engaged in “deliberate unfair claims settlement practices,” which included “serious delays at every stage of responding to policyholder claims” and “unjustified denials.” The regulator alleges these actions have resulted in “financial losses” and “emotional distress” for policyholders.

The filings state that CDI first raised these concerns with Tesla in 2022, but claims the situation has deteriorated since then. “By 2025, the Tesla Companies have already received more complaints, more substantiated complaints, and committed more violations than in the previous three years combined,” the regulator stated.

Tesla and State National may be subject to fines of up to $5,000 for each “illegal, unfair, or misleading act” and as much as $10,000 for each “intentional” violation, according to the documents. The companies have 15 days to reply.

This enforcement could lead to further legal consequences for Tesla. In July, the company faced a proposed class action lawsuit alleging intentional delays and reductions in claim payments. On Friday, CDI noted that Tesla’s conduct may have resulted in “potential third-party liability exposure.” Both Tesla and State National did not immediately comment when asked.

Tesla introduced its own insurance offering in 2019, aiming to provide lower rates and quicker service. However, the rollout was problematic: the website frequently crashed, and when it functioned, the quotes were often much higher than customers anticipated. Nevertheless, Musk maintained it would be a “revolutionary” service.

Within three years, CDI’s records show the regulator observed a “notable rise in consumer complaints related to claims” against Tesla. As a result, CDI began discussions with Tesla and State National in December 2022.

The regulator discovered that Tesla’s “Head of Claims” role had been unfilled for several months. CDI also accused the companies of failing to disclose issues with their claims processing.

Consequently, CDI placed Tesla and State National under a kind of probation, monitoring their efforts to address these violations for half a year. According to CDI, both companies “admitted” they had underestimated the number of claims and the staff needed to manage them, and pledged to increase hiring.

Tesla did not appoint a new Head of Claims until April 2023. For the remainder of that year, Tesla and State National “reported progress in the quality” of their claims processing and in “resolving consumer complaints.”

Later that year, Reuters released an investigative report on Tesla’s insurance business, revealing ongoing issues.

CDI reached a similar conclusion in 2024. The filings indicate the regulator observed a “substantial rise” in both consumer complaints and “legal violations” by Tesla. While CDI received only 83 complaints about Tesla in 2022, that number soared to 829 in 2024. Of those, CDI determined Tesla had breached state insurance regulations in 775 cases.

CDI reports the situation has continued to worsen. By September 22 of this year, the regulator had received 1,481 complaints regarding Tesla and identified 1,969 violations of insurance law.

Since 2022, CDI claims Tesla has racked up nearly 3,000 breaches of state insurance law, most of which involve failing to respond to customers within the required 15-day window. CDI also found 166 instances where Tesla did not conduct a “thorough, fair, and impartial investigation” into claims.

“CDI repeatedly informed [Tesla] about its mishandling of claims and legal violations,” the regulator wrote. “Although [Tesla] continually promised to make improvements, the number of substantiated complaints and violations kept increasing, showing [Tesla’s] inability to fix its practices.”

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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