Does A Not-At-Fault Claim Impact Your Insurance Premium?

Car accident victims who were not at fault in the collision may inquire as to whether a claim lodged pursuant to a no-fault provision will impact their future insurance premiums. This article elucidates this prevalent concern by analysing the potential ramifications of such claims on premiums, having due regard to the legislative frameworks of each state and territory, as well as the specific policy conditions implemented by individual insurers. Our endeavour is to provide a succinct explanation of this intricate issue, obviating the need to delve deeply into the labyrinthine complexities of insurance contracts.

car insurance policy online

Impact of Non-blameworthy Collisions on Motor Vehicle Insurance Premiums

In a perfect scenario, one might reasonably expect that their motor vehicle insurance premiums would remain unaffected following an incident where they were not the party at fault. Indeed, this is often the case. Generally, there is no upward adjustment to car insurance premiums after a no-fault accident, which is defined as an accident where any injuries or damages sustained are attributable entirely to the negligent actions of another driver. However, the law of insurance is not without its complexities. In some instances, legislative provisions within a particular jurisdiction or the specific terms and conditions of an individual’s insurance policy may, even in no-fault scenarios, result in a variation to premiums. 

Consequently, a thorough understanding of the intricacies of your motor vehicle insurance policy and the diverse factors that can influence premium fluctuations following a no-fault accident is paramount.

The Interaction between State Legislation and No-Fault Insurance Schemes

The legislative frameworks of each Australian state exert a substantial influence on the post-accident claims process for motor vehicle collisions, particularly those deemed “no-fault” incidents. 

This, in turn, has a direct impact upon the availability of coverage and the subsequent determination of car insurance premiums:

It is important to note that the approach to such claims varies demonstrably across jurisdictions. In some states, claimants lodge their claims directly with their own insurer, regardless of any attribution of fault.

Conversely, other states operate under a system of comparative negligence. Under this regime, the proportionate degree of fault ascribed to each party involved in the accident can have a significant bearing on the determination of their respective car insurance premiums.

For instance, the state of California employs a contributory negligence model, whereby any damage award is diminished in direct proportion to the claimant’s percentage of fault.

In contrast, the state of Arkansas adheres to a stricter contributory negligence model, where any claimant found to be more than fifty percent responsible for the accident is entirely barred from receiving a damage award.

Furthermore, it is noteworthy that not all Australian states empower insurance companies to adjust premiums following a no-fault accident. Notably, regulatory frameworks in jurisdictions such as Oklahoma and California expressly prohibit insurers from raising car insurance premiums solely on the basis of a collision in which the policyholder was not deemed at fault.

Therefore, the geographical location of a motor vehicle accident can have a profound impact on the ultimate consequences for a no-fault insurance claim, particularly with regard to potential alterations in insurance rates.

Indemnity Policies and  Contributory Negligence in a No-Fault Scheme

The application of premium variations across insurance entities operates in a similar manner to the diversity observed in State-based legislative frameworks. While some insurers, such as USAA, generally eschew premium increases following an accident where the insured is demonstrably not at fault, this practice is not universally adopted.  Motor vehicle insurance providers retain the discretion to adjust premiums subsequent to a non-fault claim, although the quantum of such an increase will typically be lower than that levied in circumstances where the insured is deemed liable.

It is important to note that certain insurers may implement premium hikes following non-fault claims, while others, for example USAA, are known to forgo such action, particularly where the insured party was demonstrably blameless and the claim is substantiated by a police report. As such, it is incumbent upon the insured to possess a thorough understanding of their insurer’s policy in relation to premium variations and to consider exploring alternative insurance options that better align with their individual requirements.

A car applied with bandaid as accident forgiveness concept

The Operation of Accident Forgiveness in the Context of Contributory Negligence Claims

It is prudent to consider the availability of “accident forgiveness” within your motor vehicle insurance policy. This discretionary coverage, offered by some reputable insurers, operates to mitigate the potential for adverse premium adjustments following an at-fault incident. In essence, where accident forgiveness is included within your policy schedule, the first at-fault claim you lodge is unlikely to result in a premium increase. Conversely, the absence of such coverage exposes you to the risk of a premium increase following your initial at-fault claim. The significance of accident forgiveness lies in its ability to promote premium stability.

Accident Forgiveness in Australian Insurance Policies

It is pertinent to note that accident forgiveness provisions are designed to mitigate premium increases following a policyholder’s first at-fault collision. However, such provisions may not entirely obviate such increases, particularly where the policyholder previously enjoyed a safe driver or claim-free discount. Additionally, the application of accident forgiveness varies amongst insurers. Some insurers may, for instance, only offer forgiveness for a single at-fault collision within a three-year period. It is further noteworthy that repeated at-fault collisions within the applicable timeframe, notwithstanding the existence of an accident forgiveness clause, are likely to result in premium adjustments.

While accident forgiveness may ostensibly prevent an immediate premium increase, any at-fault collisions remain a matter of record on the policyholder’s driving history. This information may be accessed by subsequent insurers and potentially influence future premium calculations. Therefore, a thorough understanding of the specific operation and potential limitations of any accident forgiveness provision is imperative before incorporating it into one’s insurance policy.

A Parking Infraction Ticket

Potential Determinants of Insurance Premium Following a Non-Fault Claim

It is important to note that, beyond the express terms of your insurance policy and the relevant state legislation, a number of factors can potentially impact your premium following a non-fault claim. These factors may include your prior driving history, any history of multiple claims, and the severity of the accident itself. 

By gaining a comprehensive understanding of these considerations, you are better placed to adopt proactive strategies to mitigate potential premium increases and ensure the continued affordability of your insurance coverage.

Prior Traffic Offense History

The determination of an individual’s insurance premium following a non-contributory claim is demonstrably influenced by their prior driving record. A history replete with traffic infringements or motor vehicle accidents may result in a premium increase. This is because insurers perceive such individuals as presenting an elevated risk profile, thus warranting a commensurate adjustment to the premium to mitigate the potential financial liability.

Traffic infringement notices and accident records are typically retained on a driving record for a period of three to five years, as stipulated by relevant state and territory legislation. To demonstrably improve their driving record and potentially lessen the impact on their insurance premium following a non-contributory claim, drivers are well-advised to adopt safe driving practices. Additionally, enrolment in a government-approved defensive driving course may be a prudent consideration.

Extensive Claims History

A documented history of lodging multiple insurance claims can demonstrably lead to a significant increase in future premiums. This arises from the perception of a heightened risk profile by insurers. Typically, insurers consider a policyholder who lodges two or more claims within a three-year period to be a high-frequency claimant. The assessment of risk undertaken by insurers involves a meticulous analysis of historical loss data for relevant perils, a rigorous scrutiny of the policyholder’s risk profile, and an actuarial estimation of the probability of future claims based on this claims history.

Consequently, even in circumstances where the policyholder was not attributed fault in the underlying incidents, the mere act of lodging multiple claims can have a detrimental impact on insurance premiums. For example, a single comprehensive motor vehicle claim may demonstrably lead to an average increase of $6 per month in premiums, whilst two such claims could result in a premium increase of $13 per month.

The Extent of the Injuries Sustained in the Incident

In the context of an insurance claim, the gravity of the motor vehicle accident is a primary determinant of the resultant financial burden. This severity directly correlates with the quantum of the premium increase. It is well established that the more serious the accident, the greater the potential for a substantial rise in insurance premiums. When evaluating the gravity of a motor vehicle accident claim, insurers consider a variety of factors, including but not limited to:

  • Property damage
  • Medical expenses
  • Lost wages
  • Future earnings

The totality of these elements exerts a collective influence upon the quantum of the claim and may inform the assessment of the accident’s gravity.

It is well-established that following a motor vehicle collision, premiums associated with comprehensive car insurance policies are liable to increase by an average of approximately forty-seven percent (47%). However, the precise quantum of this increase is contingent upon the nature of the accident itself, as well as a variety of individual circumstances pertaining to the insured, including their prior driving record and the specific details of the incident. Consequently, the severity of the collision and the resultant cost of any claims made will have a significant impact on both the duration and the magnitude of the premium increase. This underscores the critical importance of carefully considering the potential ramifications for your car insurance policy following a motor vehicle accident.

a man reading his not-at fault insurance policy

Mitigating Potential Premium Augmentation Following a Non-Blameworthy Insurance Claim

Having elucidated the various factors that may impact your insurance premium following a not-at-fault claim, it is now prudent to explore strategies designed to mitigate or even obviate potential premium increases. These proactive measures may include, but are not limited to, canvassing the market for more competitive rates, undertaking a comprehensive review of your current coverage to ensure optimal alignment with your needs, and demonstrably improving your creditworthiness.

By diligently pursuing such proactive strategies and engaging in a meticulous selection process when choosing a car insurance provider, you may be able to achieve a significant reduction in your annual car insurance outlays. This, in turn, can translate into substantial cost savings over the life of your policy.

Obtaining Competitive Insurance Premiums Following a Non-Negligent Claim

One of the most efficacious methods to secure more favourable insurance premiums following a non-negligent claim lies in undertaking a comparative analysis of quotations offered by various insurers. It is not uncommon for your current insurer to adjust your premium upwards in the wake of a non-negligent accident. However, by soliciting and comparing quotations from a diversified range of insurers, you can potentially identify a more advantageous offer, thereby achieving cost optimisation.

Online Resources for Insurance Quotation Comparisons

Several reputable online platforms, such as those operated by NerdWallet, The Zebra, and Forbes Advisor, specialise in facilitating car insurance quotation comparisons specifically tailored to individuals who have lodged non-negligent claims. It is recommended that you engage in this comparative analysis on an annual basis, or at such junctures where your circumstances undergo material alterations, such as following the lodgement of an accident claim.

Undertaking a Periodic Review of Your Insurance Policy

To mitigate the potential for unjustified premium increases following a non-fault claim, a crucial element lies in the periodic review of your insurance coverage. This entails a meticulous examination of the policy wording to evaluate the necessity of either ceasing certain coverage elements or augmenting the limits of others. By undertaking such a review, you can safeguard against the risk of being over-insured and thereby expending funds on redundant coverage.

It is prudent to undertake an annual review of your motor vehicle insurance policy, with a particular emphasis placed upon renewal periods and following any substantial acquisitions or enhancements to your principal residence. When undertaking such an evaluation, key considerations germane to your motor vehicle insurance coverage include:

  • Location
  • Vehicle type
  • Driving history
  • Age
  • Gender
  • Credit score
  • Years of driving experience
  • Type of vehicle

Enhancing Your Creditworthiness

It is pertinent to note that an individual’s credit score can exert a material influence in the determination of their motor vehicle insurance premiums. Across a significant portion of Australian jurisdictions, insurance companies authorised to provide compulsory third-party insurance (CTP) or other forms of motor vehicle insurance, as defined in the relevant state or territory legislation, routinely incorporate credit-based insurance scores into their risk assessment frameworks. This practice results in a direct correlation between a policyholder’s creditworthiness and the ultimate cost of their car insurance policy. In general terms, policyholders who demonstrate a demonstrably strong credit history are likely to be offered more favourable premium rates in comparison to those with a less than satisfactory credit rating.

It is demonstrably true that an improvement in a policyholder’s credit score can demonstrably lead to a reduction in the premium payable under their motor vehicle insurance policy. Conversely, a demonstrably poor credit score can result in a significant increase, of the order of 88%, in the premium payable compared to that payable by a policyholder with a good credit score. The factors that are germane to the assessment of credit scores in the context of motor vehicle insurance include:

  • Driving history
  • Claims history
  • Payment history
  • Length of credit history

So, maintaining a good credit score and making timely payments can go a long way in helping you secure lower insurance rates.

Insurance Policy Not-At-Fault Claims

For what duration will a lodgement of a not-at-fault claim impact upon one’s motor vehicle insurance premiums?

It is not uncommon for clients to inquire regarding the potential duration for which a claim lodged pursuant to a no-fault provision may impact their future insurance premiums. In the ordinary course of events, one can expect insurance rates to remain elevated for a period of three to five years following a no-fault accident. Such incidents are typically reflected on a driver’s motor insurance record for a similar timeframe. However, it is important to acknowledge that the precise timeframe may be subject to variation contingent upon the specific regulations of the relevant jurisdiction and the internal policies implemented by the insurer.

The legislative instruments of a particular jurisdiction and the temporal parameters associated with the lodging of a claim

The impact of a no-fault claim on your insurance premium can be influenced by two key factors: the legislative framework of your respective state and the underwriting policies of your chosen insurer.

  • Statutory Provisions: Each Australian state enacts its own motor vehicle insurance legislation. These statutes may dictate whether insurers are permitted to impose surcharges following a no-fault claim.
  • Policy Terms and Conditions:  Even in jurisdictions where surcharges are lawful, the specific duration of such surcharges will be determined by the terms and conditions of your individual insurance policy.  Generally, these surcharges range from a period of three to five years following a no-fault claim.

It is therefore crucial for policyholders to be familiar with the relevant legislative provisions in their state, as well as the specific terms of their insurance contract. This knowledge will empower you to understand the potential financial ramifications of a no-fault claim on your car insurance premium.

Prudent Vehicular Operation and Premium Mitigation

It is noteworthy that a history of safe driving behaviour may contribute to a mitigation of any potential premium increase arising from a non-fault claim. While the influence of such behaviour may be less pronounced compared to a claim entirely free of fault, maintaining a clean driving record can demonstrably serve to both reduce the initial premium adjustment and expedite its return to pre-incident levels.

Subscribe to SOUL LEGAL Blog

top posts

Personal injury lawyer with pen and paper

What Is A Personal Injury Lawyer?

When you endure a physical or mental injury due to someone else’s negligence, the repercussions can be life-altering. Securing the compensation you rightfully deserve is crucial to easing the burden

What Constitutes A Compensation Payout?

If you’ve sustained injuries in a car accident and have accrued medical expenses or taken time off work for recuperation, you may have grounds for a compensation payout. For more

More Articles

A lawyer in his office
Soul Legal

Car Accident Lawyers

At Soul Legal, we possess the expertise required to optimize compensation for car accident claims. If you’re seeking a law firm committed to advocating on

Read More »