Tesla’s Smart Insurance Can Punish You—Here’s How

Tesla Insurance was sold as the upgrade: real-time data, a smart Tesla Safety Score, and lower premiums if you drive like an adult. Then a California class action landed, accusing Tesla of using “false” forward-collision warnings to inflate rates instead of relying on real crash history, and as reported by Reuters – who have been all over this scandal since it broke in 2023 – reported the judge let the case move ahead instead of throwing it out. So there is something significant in it.

Reuters’ coverage of the lawsuit spells out how that Safety Score pulls in hard braking, aggressive turns, unsafe following and those alerts your car fires even when nothing actually hits you. That is not a reward system; that is a trap dressed up as tech.

How Tesla’s Safety Score Is Used Against Drivers

After owners complained that bogus forward-collision warnings were tanking their Tesla Insurance bills, Tesla changed the math. In April 2025, trade outlets reported that forward-collision warnings were dropped from the Safety Score Beta formula, following pressure from the lawsuit and from angry drivers who were getting hit for “near crashes” that never happened. Insurance Business describes exactly that update: Safety Score 2.2 no longer counts those warnings at all.

At the same time, the California Department of Insurance opened enforcement actions against Tesla Insurance Services, Tesla Insurance Company, and its underwriting partner for repeated violations of state claims-handling laws. The department’s own press release talks about delayed payments, poor investigations, and a pattern of leaving Tesla owners without timely repairs or fair treatment. You hand over live driving data, accept coaching from the app, and still risk getting squeezed twice: once on the premium, again when you actually need the policy to perform.

The Connected-Car Warning You Can’t Ignore

Tesla is the loudest example, not the only one. In January 2025, the Federal Trade Commission hit General Motors and OnStar with a settlement that bans them for five years from sending precise location and driving-behavior data to consumer reporting agencies after finding that Smart Driver data—hard braking, speeding, night trips—fed into reports that influenced insurance quotes. The FTC’s own order describes pings collected as often as every few seconds and shared without clear consent. Your car is no longer just a machine; it is a witness. And it has better recall than you do.

Once you see Tesla Insurance and GM on the same sheet, the pattern is obvious. Usage-based insurance is sold as a discount for good drivers. In practice, it often means opaque scoring systems, long-term data files on your habits, and regulators stepping in after the damage is done.

My Verdict: Keep Your Insurance and Your Data Separate

You do not need an app in Fremont grading every second of your commute. If you are in a Tesla Insurance state, treat the Tesla Safety Score as a warning light, not a badge of honor. Get written answers on which events change your rate, keep a quote from a normal insurer in your back pocket, and never hand over live driving data for a “deal” you do not fully understand.

The cleanest move for you right now is simple: drive the Tesla if you love it, but let a boring, old-school insurer cover it. Until carmakers and insurers prove they can handle telematics without lawsuits and enforcement squads on their necks, your best protection is keeping that data line unplugged.