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

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.

HIGH REPAIR, 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.

AUTOMATED RATE HIKES

In many states where Tesla Insurance is available, its monthly premiums can vary based on daily “Safety Scores" that the automaker says reflect “real-time driving behavior” measured by sensors and software. Tesla is facing at least two class-action lawsuits that allege its vehicles are prone to producing false collision warnings that can lower the scores and inflate premiums. In court filings, Tesla has denied the allegations and sought to dismiss the cases.

Chanda Santiago, a Tesla Insurance policyholder who is not involved in the litigation, told Reuters a similar story about safety-system malfunctions, including false warnings and spontaneous slamming of the brakes. Santiago, a Maryland real estate investor, said her monthly premium recently jumped nearly 50% to about $190.

“I’m not satisfied with how the safety score is calculated,” she said. “You’re grading me on something that’s not working properly.”

Santiago said she brought her 2020 Tesla Model 3 into service several times, but was told technicians couldn’t duplicate the problems or fix them. Once, she said, a technician didn’t wear a seat belt while driving the car – a no-no automatically detected by its safety systems.

“So I got dinged” on the safety score that day, she said.

Reuters was not able to independently verify Santiago’s interactions with Tesla.

Other customers have had trouble handling the most mundane insurance matters. Lester F. Aponte, a Los Angeles attorney who signed up for Tesla Insurance in August, described a maddening ordeal to obtain proof of insurance. He said the Tesla phone app froze when he tried to access the documents. He called multiple times and was placed on hold for as long as 90 minutes.

He complained on Facebook: “The problem is there is no customer service. At all.”

He told Reuters he didn’t hear from the insurer until after he complained to the Better Business Bureau. In the end, he said, Tesla Insurance had to cancel his policy and issue a new one so that he could access the documents on the phone app.

“Fortunately, I haven't had an accident or needed to contact them about repairs,” he said.

UNDERSTAFFED AND OVERWHELMED

In the fall of 2021, Tesla began hiring claims adjusters to work in the company’s Draper, Utah, office, luring them with perks including free health insurance and a company stock purchase plan, according to the several people familiar with Tesla’s insurance operations. Their assignment: handle claims for policyholders in California and eventually in other states. Until then, Tesla had relied on another company to process California claims.

Claims soon started arriving — not only from California but also from Texas, where Tesla recently had begun offering insurance. The dozen or so adjusters saw their caseloads jump from four or five claims a day to sometimes two dozen or more. Backlogs grew into the hundreds and could take adjusters two weeks or longer to get back to a customer.

Policyholders were supposed to report claims on a phone app, but there were often glitches, so many had no choice but to call. The call queue seemed endless, the sources said, and adjusters could spend anywhere from a few minutes to nearly an hour taking initial claim reports from customers. That interrupted their work processing the claims, which takes longer and involves such tasks as reviewing repair estimates or arranging rental cars, according to the sources.

The adjusters also couldn’t tell how long people were waiting on hold and were often greeted by furious customers. Some complained about spending more than an hour on the phone, the sources said. Some callers reported being stranded on highways.

Tesla tried to hire more employees, but the process was slow, the people with knowledge of its insurance operations said. About a year after it started hiring in-house adjusters in late 2021, there were still only about a dozen adjusters in Draper because some had quit.

WAITING MONTHS FOR REPAIRS, PAYOUTS

Jonathan Garcia was driving in North Carolina last year to visit family over Thanksgiving when a deer darted in front of his 2021 Tesla Model S. Garcia, an Ohio physician, submitted a claim to Tesla Insurance for damages to the hood and bumper, according to documents Reuters obtained from the Ohio Department of Insurance through a public records request.

After Garcia reported the accident on Nov. 23 last year, he repeatedly called, emailed and left voicemail messages with a Tesla Insurance claims adjuster for three months seeking repairs and a rental car, the records show.

“There were times I was calling every day. I was leaving messages every day. I was emailing every day," Garcia said in an interview.

The insurer didn’t respond until after he filed a complaint with the Ohio insurance department, he said. Documents released by the department showed that it found Tesla "did not adequately comply with timely claim communications" as state regulations require. The department informed Garcia in March that its findings were under further review that could result in an investigation, the results of which would remain confidential.

Tesla Insurance acknowledged its adjuster “did not timely communicate and process the claim,” according to a company letter to the department dated March 2. It explained that the “communication gap” resulted “from some staffing adjustments that occurred during the time of this claim.” The insurer compensated Garcia in part by agreeing to extend his car rental for up to 21 days, according to the letter.

Garcia said it took about six months to repair his car. He said he terminated his Tesla Insurance on May 17 and switched to another company at a higher premium.

“I would have paid a very high amount of money to not go with Tesla Insurance again," Garcia said.

Scott Sawyer, a college researcher in Riverside, California, said he and his wife signed up for Tesla Insurance to cover their 2021 Model Y “because we thought it would be more seamless and easy.”

Then an uninsured driver in a pickup truck rear-ended their Tesla on a freeway in February 2022. Sawyer said it took repeated calls over seven months before the vehicle was finally repaired. While awaiting parts delayed by shortages, “we drove it with a big dent for a while,” he said.

Then, this year, on August 25, the car was parked in front of their house when a minivan struck it, crushing the vehicle’s front left side. Sawyer said someone from Tesla Insurance called him a few days later and said the company would inspect the vehicle, which had been towed.

A month went by, and “we didn’t hear a peep from Tesla,” he said. “We have tried emailing, calling, texting and the claims adjuster will not respond,” his wife, Lauren Lee Sawyer, wrote on Facebook, adding: “I am furious. I hate that I am making payments on a totaled car.”

Sawyer said he filed complaints with the Better Business Bureau and the California Department of Insurance, and contacted a lawyer. He said he eventually heard from a claims adjuster who estimated the damage at $10,000. Convinced the car wasn’t repairable, Sawyer insisted that the car be taken to a body shop.

The shop determined the car was totaled, he said, but it took more than two weeks – and intervention by his lawyer – before Tesla finally agreed. It has offered him $44,852 to settle the claim.

Will he stick with Tesla Insurance?

“Of course not,” Sawyer said. “Lesson learned there.”