Ongoing Issues: Situation Worsens Since Initial Complaints in 2022
The California Department of Insurance (CDI) first raised concerns over Tesla’s insurance practices in 2022. However, the regulator claims that the situation has only deteriorated since then. According to CDI, “In 2025, the Tesla Companies have already had more complaints, more justified complaints, and committed more violations than in the three previous years combined.”
Legal Repercussions: Potential Fines and Class Action Lawsuit Implications
Tesla and State National could face fines of up to $5,000 for each “unlawful, unfair, or deceptive act” and up to $10,000 for every “willful” act. The companies have 15 days to respond to the enforcement action issued by CDI.
This legal move could also have broader implications. In July, Tesla was hit with a proposed class action lawsuit alleging that the company deliberately delayed and minimized claim payouts.
Product Launch: Tesla’s Insurance Journey Since 2019
Tesla launched its in-house insurance product in 2019, promising cheaper premiums and faster service. However, the launch was marred by website crashes and unexpectedly high insurance quotes. Despite these initial hurdles, CEO Elon Musk had promised that the product would be “revolutionary.”
Just three years later, CDI noticed a major spike in claims-related consumer complaints against Tesla.
Regulatory Oversight: Tesla Placed on Probation in Late 2022
In December 2022, CDI began meeting with Tesla and State National over the growing number of complaints. The regulator discovered that Tesla’s “Head of Claims” position had been vacant for months and accused the companies of failing to report their claims-handling issues.
As a result, CDI placed Tesla on a probationary period, monitoring their efforts to reduce violations over six months.
Improved Claims Handling After Hiring New Head of Claims
CDI found that Tesla had underestimated the volume of claims and the staffing required to manage them effectively. By April 2023, Tesla had hired a new Head of Claims, and initial improvements in claims handling and complaint resolution were reported.
However, a later investigation by Reuters revealed that the situation was not as positive as it initially appeared.
Rising Violations: Spike in Consumer Complaints and Law Violations
In 2024, CDI detected a “significant increase” in consumer complaints and violations of insurance laws by Tesla. The number of complaints surged from 83 in 2022 to 829 in 2024. Of these, CDI found that Tesla violated the state’s insurance code in 775 cases.
As of September 2025, the regulator has received more than double that number of complaints—1,481—and identified nearly three times as many insurance code violations, totaling 1,969.
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Tesla’s insurance practices remain under intense scrutiny as consumer complaints and regulatory violations continue to rise, raising questions about the company’s claims-handling processes and overall commitment to policyholders.
https://www.newsbytesapp.com/news/auto/tesla-facing-legal-action-over-alleged-insurance-claim-denials-delays/story
