Tesla is facing a serious enforcement action from California’s Department of Insurance (CDI) over ongoing issues in its insurance division, partnered with State National Insurance Company. The regulator accuses them of deliberately delaying claim responses and unfairly denying claims, causing financial and emotional harm to policyholders.
Despite multiple warnings beginning in 2022, conditions worsened, with 2025 seeing more complaints and violations than the previous three years combined. Consumer complaints soared from 83 in 2022 to nearly 1,500 by September 2025, accompanied by thousands of breaches of state insurance laws.
A significant problem cited by the CDI was the prolonged vacancy of Tesla’s “Head of Claims” role, which contributed to poor claims management. Tesla acknowledged understaffing and promised reforms but has struggled to implement meaningful improvements. The companies risk fines of up to $5,000 for each unlawful act and $10,000 for each willful violation, with a deadline to respond in 15 days.
Tesla is also contending with a class action lawsuit accusing it of purposefully delaying payments and minimising claim settlements to reduce costs. Since launching its own insurance in 2019, meant to offer lower premiums and faster service for Tesla owners, the division has faced technical glitches, poor customer service, and rising consumer dissatisfaction over claims handling.
Other serious issues include failing to respond to claims within the required 15-day period and insufficient investigations into claims.
If Tesla does not rectify these problems, it faces substantial financial penalties and could lose its right to sell insurance in California, a major blow to its integrated vehicle and insurance business strategy.