Tesla's Insurance Arm Accused of Delays and Systemic Failures by California Regulator

Tesla's insurance arm has been accused by California's Department of Insurance of "egregious delays" and "unfair claims settlement practices" despite warnings from the regulator. The company's actions have allegedly caused "financial harm" and "distress" to policyholders. Tesla and its partner State National Insurance Company could face penalties up to $5,000 for each "unlawful, unfair, or deceptive act" and up to $10,000 for each "willful" act.

Tesla's insurance arm, along with its partner State National Insurance Company, has been accused by California's Department of Insurance (CDI) of engaging in "egregious delays" and "unfair claims settlement practices," according to recent filings Tesla’s insurance arm accused of ‘egregious delays’ and ‘systemic failures’ by CA regulator^[1]. The regulator has alleged that Tesla has routinely denied or delayed customer claims, causing "financial harm" and "distress" to policyholders.

The enforcement action, which includes allegations of "willful unfair claims settlement practices" and "unreasonable denials," could result in penalties of up to $5,000 for each "unlawful, unfair, or deceptive act" and up to $10,000 for each "willful" act Tesla’s insurance arm accused of ‘egregious delays’ and ‘systemic failures’ by CA regulator^[1]. Tesla and State National have 15 days to respond to the regulator's findings.

The issues with Tesla's insurance arm have been ongoing. The CDI first approached Tesla about these problems in 2022, but the regulator claims that the situation has only worsened since then. In 2025, Tesla has already received more complaints, justified complaints, and committed more violations than in the previous three years combined Tesla’s insurance arm accused of ‘egregious delays’ and ‘systemic failures’ by CA regulator^[1].

The enforcement action could have broader legal implications for Tesla. In July, the company faced a proposed class action lawsuit alleging that it purposely delayed and minimized claim payouts. The CDI has noted that Tesla's actions may have created "potential third-party liability exposure" Tesla’s insurance arm accused of ‘egregious delays’ and ‘systemic failures’ by CA regulator^[1].

Tesla launched its in-house insurance product in 2019 with the aim of offering cheaper premiums and faster service. However, the product has faced numerous challenges, including website crashes and inaccurate quote offerings. Despite these initial issues, Tesla's CEO Elon Musk promised it would be a "revolutionary" product Tesla’s insurance arm accused of ‘egregious delays’ and ‘systemic failures’ by CA regulator^[1].

The CDI has been monitoring Tesla's efforts to improve its claims handling since 2022. The regulator found that Tesla had a "marked uptick in claims-related consumer complaints" and accused the companies of not reporting the problems. Despite promises to improve, the number of complaints and violations has continued to increase Tesla’s insurance arm accused of ‘egregious delays’ and ‘systemic failures’ by CA regulator^[1].

As of September 22, 2025, the CDI has received 1,481 complaints against Tesla and identified 1,969 insurance code violations. 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 Tesla’s insurance arm accused of ‘egregious delays’ and ‘systemic failures’ by CA regulator^[1].

The enforcement action highlights the ongoing struggles Tesla's insurance arm has faced in providing adequate claims service. The company's response to these allegations will be closely watched by investors and financial professionals.