California Department of Insurance May Revoke Tesla Insurance Licenses

Elon Musk once promised that the “nightmare” experience of auto accident claimants would turn into a dream with Tesla Insurance. It hasn’t, according to California’s insurance regulator.

Alleging “incompetency, untrustworthiness, and misconduct” in claims handling, the California Department of Insurance may revoke Tesla’s insurance licenses, CDI warned last week.

Specifically, on Friday, CDI announced enforcement actions against Tesla Insurance Services, Tesla Insurance Company and State National Insurance Company, which could result in monetary penalties, suspension of the insurance companies’ certificates of authority to transact insurance business in California, and the suspension or revocation of the licenses of Tesla Insurance Services, which acts as an agent for both the insurance carriers in California.

Legal documents filed by CDI reveal its concerns dating back to August 2022 when the department’s Claims Service Bureau noted an uptick in claims-related complaints associated with State National policies. Tesla Insurance Services, acting as a general agent for State National since 2019, agreed to perform all the functions necessary for the sale, service, and management of the insurer’s private passenger automobile policies, CDI reports in “Accusations” and “Notices to Show Cause” documents filed against the agent and insurers. According to the CDI filings, complaints centered around consumers’ inability to get in contact with Tesla Insurance Services to submit claims or for follow-up, and to delays in resolving claims.

“In the relevant part, CDI informed [Tesla Insurance Services and State National Insurance Company] that its primary concerns included that consumers could be harmed as a result of [the] claims-handling process, including, without limitation, financial harm because they would incur out-of-pocket expenses or be exposed to third-party liability.”

State National and Tesla Insurance Services “conceded that…miscalculations regarding staffing and claims volume, and the resulting imbalance between the two, were the cause of the claims handling issues” in late 2022 and early 2023, the filings report. The documents also highlight one particular shortcoming that worried CDI—the fact that Tesla Insurance Services did not have a Head of Claims.

The filings go on to note turnover in that position—three different individuals took on the “Head of Claims” role between April 2023 and May 2025—and the fact that complaints soared between 2023 and 2025 in spite of Tesla Insurance Services and State National committing to increase staffing.

Adding to CDI’s concerns was the fact that Tesla Insurance Holdings acquired Balboa Insurance Company, renaming it Tesla Insurance Company in early 2022, and appointed Tesla Insurance Services as its agent in late 2024. The acquisition meant claims volume would grow. Even the increased staffing at Tesla Insurance Services “would be insufficient to handle the increased volume, and consumers would continue to be harmed,” CDI warned, according to the legal documents.

“In 2025, the Tesla Companies have already had more complaints, more justified complaints, and committed more violations than in the three previous years combined,” according to CDI.

The filings detail the number of complaints, justified complaints and violations of the California Insurance Code and Fair Claims Settlement Practices Regulations for each company in each of the years 2022-2025 (2025 through late September 2025), with escalating numbers reported for each company over time.

For example, according to one filing, in 2022, there were 83 complaints against Tesla Insurance Services alleging mishandling of claims and 26 violations of regulations. In 2025, those numbers soared to 1,481 complaints and 1,969 violations.

(Editor’s Note: The filing also notes justified complaints in each, including 565 of the 1,481 complaints in 2025 that were justified. But it doesn’t indicate the typical ratio of justified complaints to overall complaints for other insurance enterprises.)

Throughout the entire period from 2022-2025, CDI’s filings reports over 2,900 Code violations for the insurance services company, over 2,500 for State National, and 561 for Tesla Insurance Company. The CDI documents also delineate the types of violations, such as failing to respond to claimant inquiries within 15 days, failing to provide written updates in 30 days, failing to adopt reasonable standard for prompt claims investigation, and or failing to accept or deny claims within 40 days of receipt of proof of claim, along with about two dozen other violations.

The bulk of the violations (60-70 percent depending on the company) fell in the first category—failure to respond to claimant inquiries within 15 days.

The complaints and violations show that Tesla Insurance Services, State National Insurance Company and Tesla Insurance company “[k]nowingly commit[ted] or perform[ed]” acts such as misrepresenting pertinent facts or insurance policy provisions to claimants, and failing to acknowledge communications and act reasonably promptly upon them, among others, “with such frequency as to indicate a general business practice” of unfair claims processing, CDI’s attorney indicated in each the filings.

As a result, the companies face monetary penalties up to $5,000 for each unlawful, unfair, or deceptive act, or up to $10,000 for each such act determined to be willful.

Under the subheading “Unfit to Transact Insurance” in its statement of charges against Tesla Insurance Services company, CDI cites a section of the Insurance Code that provides grounds for revoking its license. Specifically, the quoted section of the Insurance Code refers to the punishment for a company that “has shown incompetency or untrustworthiness in the conduct of any business, or has by commission of a wrongful act or practice…exposed the public or those dealing with [it] to the danger of loss.”

Similarly, CDI indicates that the numerous complaints and violations against State National Insurance Company and Tesla Insurance Company, demonstrate that the insurers have not carried out their contracts “in good faith”—grounds for the Commissioner to suspend their certificates of authority.

The companies have 15 days to respond to the Department’s Accusations and Notices, CDI said in a media statement.

Unless the issues identified by CDI are resolved in favor of policyholders beforehand, the companies will be ordered to a hearing before an administrative law judge to determine whether they will be able to maintain their ability to transact insurance business in California as well as face significant monetary penalties.

Separately, in July, Reuters reported that the three companies were hit with a proposed class action lawsuit filed in the Los Angeles Superior Court, also alleging that the defendants failed to implement and maintain sufficient claims-handling procedures for its customers. In the lawsuit, plaintiff Carlos Magana represents a class of policyholders insured for first-party coverages—comprehensive and collision. The suit alleges that the Tesla defendants “engaged in a prevalent pattern and practice of not only unjustifiably delaying, but oftentimes downright failing to investigate, process and/or settle their insureds’ claims for vehicle damage and/or total loss despite clear comprehensive or collision coverages.”

“The Tesla Defendants’ wrongful acts toward Plaintiff and the putative insured class run the gamut from significant delays in responding to communications about their claims and claim status, requesting duplicative or unnecessary documentation, dragging their feet in undertaking a meaningful investigation into the claims, dilatorily transferring claims between multiple adjusters, allowing without any justification multiple weeks and even months to pass without reaching a coverage determination, and delaying the issuance of settlement payments to their insureds even after they have received all the required documentation and the insureds’ full cooperation” violating California’s Fair Claims Settlement Practices Regulations and the California Insurance Code, the lawsuit filing says.

Plaintiff Magana’s specific claim involved a leased Ram van that was stolen and insured under a policy from Tesla Insurance Services underwritten by State National. After not hearing from the claims adjuster within 30 days, the plaintiff persisted, according to the lawsuit, subsequently being told that a total loss adjuster was assigned to follow up. Details of Magana contacting CDI some 82 days later, and back and forth between Magana and Tesla adjusters three and six months later are set forth in the lawsuit filing, which also stated that Magana received no compensation for his loss by the filing date (more than six months later).

“As a result of the Tesla Defendants’ conduct, Plaintiff has suffered economic damages due to the loss of policy benefits, consequential economic losses including but not limited to, the amount of finance payments and car insurance he had continued to make on his stolen Vehicle, unnecessary registration fees, rental car payments, finance payments and insurance payments on a new vehicle he had to purchase so he could remain employed, and noneconomic and general damages for emotional distress from the prolonged uncertainty and financial strain caused by the Tesla Defendants’ conduct,” the lawsuit filing says.

In early 2022, Carrier Management reported remarks that Tesla CEO Musk made on an earnings conference call suggested that real-time driving behavior used to price Tesla Insurance policies would also be the key to “super-fast” claims handling, specifically referring to collision rather than comprehensive claims.

“Aspirationally, it would be like a same-day repair of a collision, which is a night-and-day difference compared to sometimes having to wait for a month while insurance claims are settled and figured out, because Tesla is also doing collision repair,” he said.

“Basically, the customer experience is just vastly better because if there’s an accident, there’s no argument. We’ll repair it immediately. And this is as compared to arguing with an insurance company and then a claims adjuster and then a collision repair center.”

“This can be a nightmare basically. So, we’re trying to turn a nightmare into a dream with Tesla Insurance,” Musk said during the 2022 earnings call.

Importantly, at the time, CM also reported that while Tesla policies include real-time driving behavior in the calculation of insurance premiums in many states, that is not the case in California.

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