- Tesla operates its own insurance company for owners of its cars
- The State of California may take away its license for failure to process claims
Tesla operates its own insurance company. But it might not do that for long.
The California Department of Insurance (CDI) announced it may revoke the company’s license to offer insurance in America’s most populous state. There are more Teslas registered in California than in any other state.
Insurance Business Magazine explains, “The companies have been directed to address outstanding claims or face a hearing before an administrative law judge. Possible outcomes include suspension or revocation of their licenses to operate in California, as well as significant fines.”
CDI alleges “the companies did not comply with claim-handling requirements, despite multiple warnings. The department also said the insurers prioritized profits over policyholder needs.”
Tesla Products More Expensive to Insure
- Tesla uses a unique approach to building a car that makes a factory efficient, but repairs expensive
Tesla operates its own insurance company because its cars cost more to insure than those of most rival automakers.
It comes down to how they’re built. Many electric vehicle (EV) builders use modular batteries. Repair technicians can replace damaged parts of their batteries.
Tesla batteries are structural parts of the car. Even minor accidents can necessitate replacing the entire battery — the most expensive part of an EV.
Tesla’s approach makes the cars cheaper to build in the first place and helps reduce vibration. However, it also makes the vehicles expensive to repair. A study earlier this year found that insurance costs on Tesla products have increased by nearly a third in the last year alone.
The company has until Oct. 18 to show it has improved its claim handling practices.
