Why Insurance Carriers Don't Offer Accident Forgiveness in California

Many insurance carriers offer auto insurance policies with accident forgiveness. In simple terms, accident forgiveness ensures that an individual's first at-fault accident won't affect their insurance rates. The carrier essentially "forgives" the accident and doesn't penalize the insured, like the accident never happened. Most consumers assume accident forgiveness is available in all states. In fact, they tend to assume it's an automatic feature included with their auto coverage. Such a feature is often optional and must be opted into for a given policy.

California Voters Kicked Accident Forgiveness out of the State Long Ago

Consumers in California often assume their auto insurance includes accident forgiveness as well. However, accident forgiveness has been explicitly prohibited by law. Voters in the state passed Proposition 103 in 1988, which forbids unfair pricing on insurance coverage. Multiple insurance carriers have been sued in California over the years for deceptive advertising practices. Advertisements used to barely mention that accident forgiveness isn't available in California. Nowadays, these advertisements must clearly state the coverage isn't available within the state.

Insurance Carriers Fuel Confusion Over the Availability of Accident Forgiveness

That hasn't stopped confusion among consumers in California, though. Many people see the national television ads for accident forgiveness from companies like Allstate and Liberty Mutual. Sadly, they don't tend to see the fine print declaring coverage unavailable in the state. Insurance agents continue to receive calls about accident forgiveness. Consumers continue to huff and puff in anger that they didn't read the fine print. Of course, most of this confusion comes directly from insurance carriers themselves.

So, Why Is Accident Forgiveness Considered an Unfair Pricing Scheme?


As previously mentioned, Proposition 103 banned unfair pricing schemes for insurance policies. Unfair or deceptive pricing hurts consumers and lines the pockets of insurance carriers. Accident forgiveness specifically is seen as unfair or deceptive in multiple ways. For starters, this optional coverage costs anywhere from 5 to 15 percent more than a policy without the coverage. Insurance providers don't always state this directly to consumers. Policies with accident forgiveness technically penalize policyholders that go many, many years without an at-fault accident.

Even individuals that have an accident forgiven may spend more money for said forgiveness long term. In some cases, a surcharge for an at-fault accident could be less than the increased cost of coverage for accident forgiveness. Most consumers fail to realize that fact, but it helps explain why California outlawed these types of policies. Consumers should always keep in mind that insurance carriers won't raise an insured's rates for an at-fault accident with a payout under $1,000.

Accident forgiveness won't make a comeback in California anytime soon. The practice has been banned for over 30 years, and not even insurance carriers have pushed for a change here. In the end, confusion persists among consumers because national advertisements are still run in California. Consumers should be wary of other states where accident forgiveness is available due to the reasons mentioned above. It's a great marketing opportunity but could hurt some consumers in the future.