Tesla's Insurance Arm Faces California Enforcement Action Over Claims Delays
California's Department of Insurance has filed an enforcement action against Tesla's insurance division for routinely delaying and denying customer claims despite years of regulatory warnings. The regulator identified nearly 3,000 violations of state insurance law since 2022, with consumer complaints jumping from 83 to over 1,481 in just three years.
Regulatory Action Details Mounting Violations
California's Department of Insurance (CDI) has filed an enforcement action against Tesla's insurance division, citing "willful unfair claims settlement practices" that include "egregious delays" and "unreasonable denials" of customer claims. The regulator alleges these practices have caused "financial harm" and "distress to policyholders." Tesla and its partner State National Insurance Company could face penalties up to $5,000 per unlawful act and $10,000 per willful violation, with the companies having 15 days to respond to the charges.
Three Years of Escalating Consumer Complaints
The enforcement action reveals a dramatic escalation in problems since regulators first approached Tesla about claims issues in 2022. Consumer complaints against Tesla jumped from just 83 in 2022 to 829 in 2024, with CDI finding violations in 775 of those cases. Through September 2025, complaints reached 1,481 with 1,969 identified insurance code violations. The regulator noted that "in 2025, the Tesla Companies have already had more complaints, more justified complaints, and committed more violations than in the three previous years combined."
Rocky Launch and Broken Promises
Tesla launched its in-house insurance product in 2019 promising cheaper premiums and faster service, with Elon Musk calling it a "revolutionary" product. However, the launch was plagued by website crashes and quotes that were far higher than owners expected. The company's "Head of Claims" position remained vacant for months after regulators identified problems in 2022, and it took until April 2023 to fill the role. Despite temporary improvements reported later that year, the situation deteriorated significantly by 2024.
Potential Legal and Financial Consequences
The enforcement action could have broader legal implications for Tesla, as the company was already hit with a proposed class action lawsuit in July alleging purposely delayed and minimized claim payouts. CDI specifically noted that Tesla's actions may have created "potential third-party liability exposure." Since 2022, Tesla has accumulated nearly 3,000 violations of state insurance law, with the majority involving failures to respond to customers within the mandatory 15-day period and 166 violations for failing to conduct thorough investigations into claims.