California targets Tesla insurance with enforcement actions
California's insurance regulator has launched enforcement actions against Tesla Insurance and its former underwriter for repeated failures in handling policyholder claims. The companies face potential license suspension, revocation, and hefty fines if they do not resolve outstanding issues. Complaints have surged since 2022, highlighting delays, denials, and staffing shortages.
The California Department of Insurance (CDI) has accused Tesla Insurance Services, Tesla Insurance Company, and State National Insurance Company—once Tesla's underwriter in the state—of prioritizing profits over policyholder needs. Despite multiple warnings, the insurers failed to comply with claim-handling requirements, leading to enforcement actions announced recently.
Complaints began rising in August 2022, with consumers reporting difficulties contacting State National to submit or follow up on claims, as well as delays in resolutions. After meetings, the companies acknowledged underestimating staffing needs and claim volumes, committing to fixes. However, issues escalated again in 2024, with at least three individuals serving as head of claims between April 2023 and May 2024.
Over the past three years, the CDI documented specific violations from July 31, 2024, to September 22, 2024: 396 failures to respond to inquiries within 15 days, 22 failures to accept or deny claims within 40 days, and 10 instances requiring claimants to travel unreasonable distances or endure excessive waits for inspections, estimates, or repairs. Regulators also cited delays and denials in payments, unfair investigations, and failures to inform policyholders of their right to have denials reviewed by the department.
The CDI has directed the companies to address outstanding claims within 15 days or face a hearing before an administrative law judge. Potential penalties include license suspension or revocation, fines up to $5,000 per unlawful act, and $10,000 per willful violation. As the CDI noted, “respondents and [the insurance company] concede that they have not been able to keep staffing on pace and acknowledge that they are responsible for the staffing shortfall,” despite prior warnings.
This action comes amid Tesla's shift to self-underwriting in California this year, its first full management of policies since launching Tesla Insurance in 2019. The company reported a $42 million net underwriting loss in the first nine months of 2024, despite premium growth. Separately, a class-action lawsuit alleges overcharging based on inaccurate vehicle safety data, and Tesla recently hired a former GEICO executive to lower premiums. Insurance Commissioner Ricardo Lara's office emphasized the case as part of their process for resolving complaints and pursuing action when needed.