The insurance overcharging lawsuit continues.
Tesla has been given more time to prepare its defence in a class action complaint alleging overcharging for insurance. Judge Michael Markman of Alameda Superior Court in Oakland has ordered that the case, in which Tesla allegedly increased insurance premiums based on incorrect crash warnings, will be examined for class-action status in October 2025.
A Tesla customer filed the complaint last year, representing customers from 11 states, claiming that the company’s insurance premiums were unfairly hiked as a result of “false” crash notifications rather than actual driving behaviour. The case alleges that Tesla’s insurance policies, which were marketed directly to customers, violated California’s unfair competition legislation and driver contracts.
At a recent hearing, Tesla’s attorney, Min Kang, detailed the difficulties in obtaining the required facts to build a defence, noting other states’ involvement and the loss of a key employee. Kang stated, “Just last week, we lost our main contact at the company,” emphasising the complexity of the procedure.
Despite Tesla’s denial of any wrongdoing, the business suffered setbacks last year and in June after failing to dismiss several claims in the case.The lawsuit cites Tesla’s use of real-time driving data to calculate insurance premiums, which are based on a “safety score” that includes metrics like as forceful braking, aggressive turning, and forward collision warning. Many drivers reported receiving unnecessary collision alerts, which reduced their safety scores and, as a result, their insurance prices.
Elon Musk, Tesla’s CEO, has made a significant foray into the insurance business. Tesla Insurance, which began in California, claimed premiums up to 30% lower than standard insurers. The company believes it can provide cheap rates by using its extensive knowledge of its vehicles’ technology and safety features.
Tesla’s insurance history began in 2016 with the InsureMyTesla programme in Australia and Hong Kong, which then expanded into North America in 2017 through agreements with Liberty Mutual and Aviva. However, this programme failed to reach Musk’s objectives, necessitating the establishment of Tesla Insurance in 2019.This programme offers personalised prices based on real-time driving data, with the goal of providing a more enticing choice for Tesla customers.The corporation recently stated that premiums had exceeded half a billion.
Warren Buffet, CEO of Berkshire Hathaway, advised shareholders at the time that Tesla’s insurance plan was a bad idea. He stated: “The success of auto companies entering the insurance business is probably as likely as the success of insurance companies entering the auto business.” I’d bet against any corporation in the auto industry expanding into insurance.”
Tesla’s decision to self-insure elicited conflicting comments from industry observers. Critics questioned the company’s capacity to appropriately price insurance, while others, such as Ian Sweeney of Trov, saw potential benefits in combining insurance with Tesla’s technology breakthroughs.
“First and foremost, when Tesla first entered the industry, they did not actually bear the risk; they were simply a distribution channel,” Adam Denninger, worldwide industry leader for insurance at Capgemini, told IBA.
“What you’ve seen for a long time is that a lot of technology companies entering the distribution side of the industry – offering new agent experiences, new data collection mechanisms, and even occasionally doing the underwriting – have all had a similar experience.” They suffered a significant financial loss.
“[These companies] came in thinking that the technology was the hard part, and thinking insurance is this old, slow backwater industry,” Denninger recalled.
“[They thought] it wasn’t that difficult, and they could fix it. But they realised [insurance] was tricky, and it’s hard to do without losing your shirt. I believe that’s what happened to Tesla.
In an effort to reduce high premium costs, Tesla recently hired Allen Laben, a former GEICO executive, as its head of insurance relationships. Laben’s position is collaborating with insurance providers and collision shops to lower the overall cost of Tesla ownership.
