Snejina Zacharia, Founder/CEO | Insurify
California regulators have warned Tesla Insurance that its license to sell auto insurance in the state could be revoked after receiving thousands of complaints from policyholders about how the company handles claims.
The California Department of Insurance (CDI) stated that Tesla Insurance and its underwriter, State National Insurance Company, ignored repeated warnings from regulators. “Instead,” the CDI alleged, the companies “chose to abandon their responsibility to consumers and persist with their non-compliant claims-handling practices, placing profits above people and flouting the law with impunity.”
Since 2022, the CDI’s claims services bureau has received 2,460 complaints from Tesla Insurance policyholders, most of whom are Tesla owners. Investigations found that the insurers violated state insurance regulations 2,568 times. Tesla and State National have been given 15 days to respond to the CDI’s notice of enforcement action issued on October 3.
The CDI’s enforcement notice lists several violations based on customer complaints. These include not responding to policyholder inquiries, failing to provide written updates, not paying claims, and not making timely decisions on whether to accept or deny claims as required by law. The department also cited over 150 instances where Tesla or State National did not investigate claims thoroughly or fairly. In some cases, policyholders were required to travel long distances or wait extended periods for vehicle inspections or repairs.
In one example, the insurer did not pay for completed work within 10 days of receiving an itemized bill or invoice, as required by state law.
The CDI said that the “incompetency, untrustworthiness, and misconduct … constitute grounds for the Insurance Commissioner to suspend or revoke their licenses.” Both insurers could also face fines between $5,000 and $10,000 for each violation, which could total between $12.8 million and $25.6 million.
California remains the largest market for Tesla vehicles in the United States. According to World Population Review, more Teslas are sold in California than in any other state. Data from the California New Car Dealers Association shows that in 2024, Tesla made up about 53% of California’s electric and hybrid vehicle market, a decrease of 7.6% from the previous year.
In July, a group of Tesla Insurance policyholders filed a class action lawsuit against the insurer, alleging delays and failures in investigating, processing, and settling damage claims.
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