Independent agents in Massachusetts have charged that Progressive Insurance, which began selling auto insurance online in the state May 1, is skirting state regulations and misleading consumers with its Web site quoting program.
The Massachusetts Association of Insurance Agents (MAIA) said the insurer is asking for customer information including gender and marital status that the state has prohibited insurers from using in rating or underwriting and it is offering only six month policies while the state says twelve-month policies must be made available.
Progressive has called the criticisms inaccurate, while the state Division of Insurance says it is now reviewing the Web site along with MAIA’s complaints. The state did, however, say that Progressive’s rates and its rating criteria in Massachusetts have been approved, even if language on the web site suggests otherwise.
MAIA President and Chief Executive Officer Francis A. Mancini said that initial reports of “dirt cheap” rates prompted his association to look deeper at the Progressive Web site and its actual quotes. The group issued a consumer warning after its review:
“Our review of the quotes provided by Progressive reminds us of the old saying, ‘if it looks too good to be true, it probably is.’ Consumers should use extreme caution when requesting online quotes because a computer doesn’t ask the questions a live person would ask to be sure you are adequately protected.”
Mancini’s association has asked Insurance Commissioner Nonnie Burnes to review the site and take corrective action. “Such a comprehensive review can result in nothing less than an order from the DOI that Progressive discontinue use of the site until it complies with the DOI bulletin and regulations and provides consumers with honest explanations regarding the quoted coverages and all coverage options available to them,” the group said in a letter to Burnes.
The DOI said it has ensured that Progressive is basing its rates on driving record and driving experience, not on any of the prohibited rating factors. DOI acknowledged that it had not reviewed Progressive’s Web site operation prior to it going live in the Bay State. The state said it has since contacted the insurer about some of the terms on the Web site.
“We began to carefully examine the company’s Web site as soon as it launched last Thursday and have already communicated concerns about the site’s language directly to the company,” said Kimberly Haberlin, press secretary for Burnes, the DOI and the Office of Consumer Affairs and Business Regulation. “We received MAIA’s letter today and will review those issues as we work with Progressive and all companies to ensure that everyone continues to adhere to the rules of managed competition.”
Progressive suggested that the dispute is a competitive volley by independent agents against online sales.
“It’s unfortunate that the Massachusetts Association of Insurance Agents didn’t contact us about their concerns before issuing an inaccurate news release,” said John Barbagallo, Agency Operations, Progressive.
MAIA represents 1,600 independent insurance agencies. Independent insurance agents write more than 80 percent of the personal lines insurance in the state.
Progressive also sells through independent agents but that unit is not yet active in private passenger auto insurance in Massachusetts. Progressive rolled out its online sales first under the state’s new managed competition system and has said its independent agent unit will begin next year.
“As the largest seller of auto insurance through independent agents in the U.S., we recognize that many consumers prefer the objective, in-person counsel independent agents offer. And we recognize that a lot of consumers are comfortable shopping for and buying insurance online. The good news is that there are choices in how to buy available to Massachusetts drivers,” said Barbagallo.
Progressive responded to MAIA’s specific criticisms and expressed confidence that consumers will be given the information they need to choose wisely. DOI did not immediately respond to MAIA’s specific concerns.
According to MAIA, the Progressive Web site asks a number of questions, some of which are prohibited by insurance regulations. The prohibited information includes social security number, gender, recent military service and marital status. The quote process also discloses that Progressive obtains credit reports and credit scoring information, which is prohibited in Massachusetts for both rating and underwriting purposes, MAIA said.
Progressive said it asks for the social security, gender, military and marital status information but doesn’t use it. “We ask similar questions in Massachusetts as we do in other states in which we sell auto insurance. However, in determining a driver’s premium, we only use information allowed by Massachusetts regulations,” said Progressive.
On the credit scoring disclosure, the insurer said it would remove the language. “This is standard disclosure language used in other states where Progressive uses credit information. Because financial information from credit reports is not allowed in setting rates in Massachusetts, we do not use it. We are having this standard disclosure language removed from the Web site,” the company said.
Massachusetts law requires that every insurer offer twelve-month term policies yet MAIA said there is no place on the Progressive site where a consumer may exercise this option.
Furthermore, MAIA complained, comparative quotes offered by Progressive of its rates with the rates of other companies in Massachusetts use a policy term of six months, which is not available from any other insurance company in Massachusetts.
Progressive said it generally offers six-month policies, but maintained that in compliance with state regulations, twelve-month policies are available to Massachusetts drivers. Since its typical policy is for six-months, the insurer said its comparison quotes are for the same term and it simply divides other carriers’ twelve-month premium in half for the comparison.
Agents expressed concern that buyers using the site would be left with gaps in coverage compared to what they are accustomed to having.
In one example, the basic coverage quote provided by Progressive includes “just enough coverage to put a vehicle on the road, but fails to warn drivers that this option would not cover a guest passenger in a vehicle and would not provide coverage anywhere other than on a public road within Massachusetts (no out-of-state coverage),” Mancini’s group maintained.
Progressive said it agrees that compulsory bodily injury coverage is “not adequate for many drivers” and for that reason it will not sell this coverage without optional bodily injury through the Web site. The company said that all quotes include two parts of bodily injury coverage—the mandatory part and the optional part—and “this is clearly spelled out” on the site. “If a customer insists on just buying basic coverage, we ask that they call us so that we can counsel them to be certain they understand the limitations of basic coverage,” the insurer said.
If an applicant indicates that all members of the household have health insurance, the quote will include an $8,000 Personal Injury Protection (PIP) deductible. MAIA warned that this occurs despite the fact that PIP provides benefits for costs not covered by health insurance, like the cost of replacement services, lost wages, dental services, professional nursing and funeral services.
Progressive responded by saying that if customers indicate they have existing health insurance, it presents a PIP deductible of $8,000. However, the deductible is in a “clearly marked pick list that the customer can use to choose any level of deductible they desire, including no deductible.” That way customers can buy the coverage they need, according to the insurer.
Agents also complained that Progressive quotes include a $500 deductible for glass coverage, while virtually all Massachusetts auto policies with comprehensive coverage provide first dollar coverage for glass damage.
Progressive claims it offers glass repair at no charge but it presents a $500 deductible for glass replacement coverage “because this is typically much more economical.” Customers can reduce the deductible if they choose and, the insurer added, all of the available options and their costs “are clearly displayed during the quoting process.”
While other insurance companies’ quotes include an indication of the impact that driving record has in terms of accident and traffic violation surcharges and credits for good driving, the Progressive quote does not appear to include this type of merit rating information, agents said.
Progressive said it uses driving history as disclosed by the customer to quote premiums. “If the customer indicates they would like to buy that policy, we verify the driving information using customer reports as disclosed on the site. Each violation or incident is then shown to the customer who, if necessary, can dispute the validity of any incident. In addition, all policy documents clearly show all incidents and violations used in setting the rate and the source where information on that violation/incident was obtained,” the insurer said.
The agents also warned consumers that Progressive does not offer the waiver of deductible endorsement that is offered by other companies. But Progressive said it does offer the endorsement.
MAIA said the difference between the Progressive “Economy” and “Recommended” quotes it reviewed was $1 in premium. The $1 was the difference between $50,000 and $100,000 in property damage coverage. The Progressive Web site offered no explanation or even a caution notice to consumers. Mancini said a “live person would certainly point this out and recommend paying $1 more for twice the coverage.”
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