GEICO Sued Over Alleged Misleading Practices in Accident Forgiveness Program
GEICO is facing a class-action lawsuit filed in Texas, alleging deceptive practices regarding its accident forgiveness program. The lawsuit, reported by AM Best, claims the insurer misrepresents how it handles rate increases following a policyholder’s first at-fault accident.
The core of the legal action centers on the case of Christopher Cude, a Texas resident who enrolled in GEICO’s accident forgiveness program in May 2024. According to the complaint, Cude’s premium increased by 91.3% after his wife was involved in an accident in October. When he received his renewal notice the following month, he was informed the additional charge was a surcharge, not a premium increase.
GEICO markets its accident forgiveness program as a safeguard against rate hikes after a policyholder’s initial at-fault accident. The company’s website states, “Your insurance rate won’t go up as a result of your first otherwise surchargeable, at-fault accident.” The lawsuit contends that GEICO’s approach to premium adjustments contradicts this marketing and customer communication.
The plaintiffs further highlight GEICO’s substantial advertising investments, indicating the company spent $1.5 billion on marketing in 2022 and continues to heavily promote its accident forgiveness program. The primary claim is that, regardless of the marketing, policyholders may still experience significant increases classified under a different category.
Consumer advocates have long voiced concerns about accident forgiveness programs, claiming that insurers often employ hidden costs through alternative pricing structures. Critics argue that policyholders may not fully grasp the limitations of these programs, especially the nuanced definitions of surcharges versus standard premium increases.
GEICO has requested an extension to respond to the lawsuit, with a new deadline set for May 9th, according to the report. The insurer declined to comment, citing the ongoing litigation. This case introduces further scrutiny to the insurance industry’s methods for adjusting premiums and managing policyholder benefits.
Consumer interest groups are advising drivers to thoroughly examine their insurance policies and seek clarification on how their accident forgiveness coverage operates.
GEICO, a subsidiary of Berkshire Hathaway Inc., experienced a strong financial performance in 2024, with earnings more than doubling to $7.81 billion. The company’s total written premiums rose by 7.7% to $42.92 billion. Berkshire Hathaway’s insurance entities currently hold Best’s Financial Strength Ratings ranging from A++ (Superior) to A- (Excellent).
