Tesla launched its own car insurance. These drivers say it's a lemon: 'totally ridiculous'

In February, Mark Bova purchased a used 2018 Tesla Model S. Before leaving the dealer, he bought insurance from Tesla itself, finding the initial $93 monthly premium “really reasonable.”

Sixteen days later, as he drove along the Capital Beltway to his Maryland home, he engaged Autopilot, Tesla’s automated driving system. The car started beeping and lurched left — striking a median and flipping. He escaped through a window as the car filled with smoke. An ambulance rushed him to the hospital with back injuries that later required surgery.

“I’m a former Green Beret,” Bova said, referring to the U.S. Army Special Forces. “That was probably the second-most traumatic thing I've gone through other than being in combat.”

His ordeal isn’t over. Tesla Insurance, launched in 2019 by the electric-car company, has promised policyholders “vastly better” service than rivals, as Tesla chief Elon Musk put it in April 2022. Musk also said he aimed to offer “same-day” collision repairs. But Bova says he has been battling the insurer ever since the crash.

He said he waited seven months for payment on the totaled vehicle and still hasn’t been compensated for about $50,000 in medical expenses. That required a call to the automaker’s product liability department because the crash involved Autopilot, he was told. He waited on hold for hours and got hung up on four times, he said. When someone finally answered, the person promised another callback in two weeks. Four months later, he’s still waiting.

Tesla and Musk did not respond to detailed questions from Reuters for this report.

Bova isn’t the only customer Tesla Insurance has angered, according to scores of complaints in social media and online posts, including on a Better Business Bureau website, and Reuters interviews with half a dozen policyholders. While some customers in online posts have praised the insurer’s low premiums, others, like Bova, complain of waiting weeks or months for payouts and repairs, and an inability to reach claims adjusters.

Tesla officials have said they started the insurer to solve a problem: Prospective customers walking away from car sales after getting sky-high insurance quotes, based on the electric vehicles’ high collision-repair costs. Despite promising to revolutionize automobile insurance, Tesla has at times run the business on a shoestring budget, at one point with only about a dozen adjusters who were quickly overwhelmed by hundreds of claims, according to several sources familiar with the insurer’s operations.

The insurer’s problems fit into a pattern of rushed and sloppy management leading to consumer and worker harms across Musk’s empire of technology and manufacturing firms. The billionaire’s decisions have come under fire in the year since he bought Twitter, now renamed X. Advertising revenue and company value plummeted after Musk slashed the firm’s staff by more than half and introduced a series of unpopular platform changes. After Musk endorsed an antisemitic post on X last week, several major companies halted their advertising on the platform. Musk denied being antisemitic.

At Tesla, employees shared sensitive videos and images of owners recorded by the cars’ cameras, Reuters reported in April, prompting two U.S. senators to write Musk a letter stating that the article raised “serious questions about Tesla's management practices.” In July, the news agency exposed a systematic effort by Tesla to overstate its vehicles’ driving range — including by rigging the algorithm that controls in-dash estimates — leading to a federal investigation and several class-action lawsuits.

This month, a Reuters investigation documented at least 600 injuries at rocket-maker SpaceX, and pervasive failures to report safety data to regulators, as workers scrambled to meet Musk’s ambitious deadlines for space missions. Late last year, Reuters exposed how experiments at Musk’s brain-chip startup, Neuralink, resulted in the unnecessary suffering and deaths of lab animals as researchers rushed to appease Musk’s demands for speedy regulatory approvals.

Complaints about Tesla Insurance are drawing scrutiny from state regulators and the plaintiffs’ bar. The Ohio Department of Insurance at least twice this year determined that Tesla had violated the state’s insurance regulations in handling claims, including for a lack of timely communications with a policyholder, according to correspondence obtained by Reuters through a public records request. The department was considering opening formal investigations, the records show. The agency declined to comment.

Customer complaints against auto insurance companies aren’t uncommon. And there’s no way to know exactly how many have been made against Tesla Insurance and how its record compares with competitors’. That’s in part because regulators in some states where it does business – including California, Utah, Illinois and Virginia – consider details of complaints confidential.

In interviews, customers described their interactions with the insurer as frustrating on many levels. Phil Fioresi Sr., a stonecutter in South San Francisco, California, told Reuters it took about 15 calls to reach someone at Tesla Insurance after his daughter’s car was struck by one of its policyholders in September. He called the service “totally ridiculous.”

“What do they have, three people answering phone calls?” he asked.

The insurer wouldn’t divulge the current number of claims adjusters. But the dozen or so adjusters who started handling California claims in late 2021 were quickly so swamped that resolving cases took weeks or months, the people familiar with the operations said. At the time, Tesla insured more than 50,000 vehicles in the state, according to California Department of Insurance records.

Working out of a Tesla office in Draper, Utah, the initial adjusters sometimes had to take on hundreds of claims each, far more than at other insurers, according to the sources with knowledge of Tesla Insurance’s operations. Unlike competitors that often have separate call centers to take claim reports, Tesla’s adjusters had to answer the phones themselves while also handling claims.

Tesla has since expanded into 11 more states, hired additional claims adjusters in Texas and Maryland, and has been trying to bring on more, according to LinkedIn profiles and company job listings. But accounts of delayed repairs and compensation, and long waits for service continue to appear online.

The accounts of customers interviewed by Reuters contrast sharply with Tesla’s bold promises to policyholders. On an earnings call in April 2022, Musk said: “Basically, the customer experience is just vastly better because if there’s an accident, there’s no argument. We’ll repair it immediately.”

He blasted the typical auto insurance experience as a “nightmare” of arguments with insurance companies, adjusters and repair centers. “So we’re trying to turn a nightmare into a dream with Tesla Insurance,” he said.

Addressing high repair and insurance costs

Tesla decided to enter the auto insurance business “kind of unintentionally,” Zachary Kirkhorn, then Tesla’s chief financial officer, explained during an earnings call in October 2021.

“Our customers were coming to us, complaining that the price of traditional insurance was too high, and it was reducing the affordability of a Tesla,” Kirkhorn said. “And part of our journey here at Tesla is, we want as many people as possible to be able to afford our products.”

Kirkhorn didn’t respond to a request for comment.

High insurance costs had for years made it harder to sell Teslas. It’s a common problem among makers of electric cars, which have higher collision repair costs, especially for replacement of their pricey batteries, than gasoline-powered vehicles.

In 2015 and 2016, the Highway Loss Data Institute, a nonprofit insurance research organization, reported that Teslas had significantly higher collision and property damage claim frequencies and losses than conventional large luxury vehicles. Based in part on that data, insurer AAA-The Auto Club Group said in 2017 that it was raising its rates to cover Teslas by up to 30%. Tesla disputed AAA’s analysis at the time.

That fall, Tesla launched InsureMyTesla, a new insurance offering for U.S. Tesla owners, in partnership with Liberty Mutual Insurance Co. But the cost issue persisted. In an online discussion on Reddit at the time, Tesla owners swapped stories about steep premium quotes from InsureMyTesla. One Reddit user called the rates “horrible.”

InsureMyTesla was eventually pulled from the U.S. market, although it’s still offered in some other countries. A spokesman for Liberty Mutual declined to comment on its relationship with Tesla.

In April 2019, Musk announced that Tesla would launch its own insurance business that would be “much more compelling than anything else out there." Four months later, Tesla Insurance became available in California, Tesla's largest car market, promising greatly reduced rates and saying it would expand to other states.

To enter California, Tesla partnered with Markel Group's State National Insurance Company, which the state had already approved to sell insurance. State National has had the worst consumer complaint record among California’s top 50 auto insurers for the past three years, according to the state insurance department. State National works with other companies besides Tesla, and the statistics don’t show how many of the insurer’s complaints involve Tesla policyholders.

State National declined to comment.

Musk continued expressing sky-high hopes for the business. In July 2020, Musk called Tesla Insurance “revolutionary” on an earnings call. He predicted in another call three months later that insurance eventually could account for 30% or 40% of the value of the Tesla car business, which currently has a market capitalization of more than $700 billion.

Tesla Insurance has expanded rapidly. It’s now offered in states including Illinois, Colorado and Ohio, and Tesla has applied to sell insurance elsewhere, including Florida, Georgia and Washington, regulatory filings show.