Tesla’s in-house insurance arm is facing a major crackdown in California, hit with an enforcement action by the state’s Department of Insurance (CDI). The regulator alleges the company has been routinely denying or delaying customer claims despite years of warnings.
According to new filings, Tesla and its partner, State National Insurance Company, engaged in “willful unfair claims settlement practices,” including “egregious delays” in responding to claims and “unreasonable denials.” The CDI states these actions have caused “financial harm” and “distress to policyholders.”
Violations Have Escalated Sharply
While Tesla Insurance launched in 2019 with a promise of cheaper premiums and faster service, the CDI noted a “marked uptick in claims-related consumer complaints” by late 2022.
The regulator attempted to address the issues by entering a six-month probationary period with the companies. Tesla reportedly “conceded” that they had underestimated the volume of claims and required staffing, promising to hire more—it took them until April 2023 to hire a new Head of Claims.
Despite these promises, the situation drastically worsened:
| Metric | 2022 Complaints | 2024 Complaints | 2025 Complaints (Through Sept 22) |
| Consumer Complaints | 83 | 829 | 1,481 |
| Identified Violations | N/A | 775 | 1,969 |
The CDI warns that in 2025 alone, the “Tesla Companies have already had more complaints, more justified complaints, and committed more violations than in the three previous years combined.” Since 2022, Tesla has accumulated nearly 3,000 violations of state insurance law, mostly involving a failure to respond to customers within the mandatory 15-day period.
Penalties and Legal Fallout
The core of the issue is what’s known as a claims-mishandling problem. The CDI wrote that even though it “repeatedly notified [Tesla] of its claims-mishandling issues and violations of law,” the promised improvements never materialized.
The enforcement action could be costly for the companies, who face penalties of up to $5,000 for each unlawful act and up to $10,000 for each “willful” act. Tesla and State National have 15 days to respond to the filings.
The regulatory action also brings further scrutiny to Tesla’s legal exposure. The company was already hit with a proposed class-action lawsuit in July over allegations that it intentionally minimized and delayed claim payouts. The CDI suggests Tesla’s behavior may have created “potential third-party liability exposure.”
