Accident Forgiveness, a Potential Moral Hazard?

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Accident Forgiveness, as practiced by auto insurance companies, appears to reward customers who drive safe having no accidents in an extended duration.

However, the accident forgiveness I just was awarded by GEICO got me to thinking. As you can read below in the FAQ, accident forgiveness means our rates will NOT go up as a result of our first at-fault accident. This means if we negligently crash into a store front and cause half million dollars in damages and possible medical costs, then our premiums will not increase.

This appears to be a type of moral hazard where a safe driver might become lax because they know insurance will cover all costs with no attendant elevation of premium payments. Now, of course, nobody would intentionally wreck into something just cuz they could, or would they?! BTW, GEICO did this for us not too long after we paid our 6 month premium on three vehicles(Of course, our clean driving record influenced them more). GEICO is also forgiving on another front. We are struggling financially and have been late many times with these guys without any lapses in coverage. They are much more compassionate and caring than the image many have of cruel and impersonal corporations!

GEICO accident forgiveness observation

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