GEICO is facing a class-action lawsuit alleging the insurer misrepresented its accident forgiveness program by reclassifying premium increases as surcharges, according to a report from AM Best.
The lawsuit, filed in Texas, claims GEICO advertises that policyholders will not see their rates rise after their first at-fault accident but applies charges under a different name.
The case centers on Christopher Cude, a Texas resident who enrolled in GEICO’s accident forgiveness program in May 2024. According to the complaint, after his wife was involved in an accident in October, his premium increased by 91.3%. When he received his renewal notice in November, he contacted GEICO and was told the higher price was a surcharge rather than a premium hike.
GEICO’s accident forgiveness program is marketed as a way to prevent rate increases following a policyholder’s first at-fault accident. The insurer states on its website: “Your insurance rate won’t go up as a result of your first otherwise surchargeable, at-fault accident.” However, the lawsuit argues that the company’s handling of premium adjustments contradicts its marketing and customer communications.
The complaint also highlights GEICO’s significant advertising expenditures, alleging the company spent $1.5 billion on marketing in 2022 and continues to invest heavily in promoting its accident forgiveness program. Plaintiffs argue that despite these assurances, customers may still face substantial rate hikes under different classifications.
Consumer advocates have long raised concerns over accident forgiveness programs, arguing that insurers often impose hidden costs through alternative pricing structures. Critics suggest that policyholders may not fully understand the limitations of these programs, particularly how surcharges and premium increases are defined.
GEICO has requested an extension to respond to the lawsuit, with a new deadline set for May 9. The company declined to comment, citing ongoing litigation, according to the report.
The case adds to growing scrutiny of insurance industry practices regarding premium adjustments and policyholder benefits. Consumer groups encourage drivers to carefully review their policies and seek clarification on how accident forgiveness is applied.
GEICO, a subsidiary of Berkshire Hathaway Inc., reported strong financial performance in 2024, with earnings more than doubling to $7.81 billion. The company’s total written premiums increased 7.7% to $42.92 billion. Berkshire Hathaway’s insurance entities currently hsold Best’s Financial Strength Ratings ranging from A++ (Superior) to A- (Excellent).
