Tesla’s insurance business has been accused of glaring delays and institutional failures by a California watchdog. The automaker is allegedly causing harm to its policyholders.
California’s Department of Insurance (CDI) has slammed Tesla’s insurance arm and partner State National Insurance Company. The regulatory body is alleging that Tesla’s insurance business engaged in wilful unfair claims settlement practices leading to unreasonable denials and unnecessary delays in each step of the process.
CDI stated that Tesla’s insurance business practices have brought financial harm and distress to its customers.
Tesla began offering insurance products in 2019, with the promise of more affordable premiums and faster services. CEO Elon Musk described them as revolutionary, but by 2022, CDI had brought allegations of infractions to the company’s attention. Three years later, the situation has worsened, instead of improved, despite being subjected to a six-month monitoring period. CID stated, “In 2025, the Tesla Companies have already had more complaints, more justified complaints, and committed more violations than in the three previous years combined.”
Tesla and its partner have 15 days to respond, and potentially face fines of up to $10,000 for each “unlawful, unfair, or deceptive act” and “wilful” act, with violations totalling nearly 3,000.
The EV maker’s venture into insurance has been plagued by problems from the start. The website crashed multiple times and provided extraordinarily high quotes. Tesla and State National also “conceded” they had underestimated the staffing required to handle the volume of claims that they got.
The damning report could have come at a worse time for Tesla. The company was sued by a group of customers for failing to process claims in a timely manner in July.
