Progressive to Pay $125K Fine in Massachusetts‎

December 13, 2011

The Massachusetts Division of Insurance announced a $125,000 financial settlement with Progressive Direct Insurance Company.

Regulators said Progressive erroneously informed some Massachusetts consumers that they had used credit information to determine their auto insurance rate through its website.

Regulators said that starting in September 2010, Progressive’s website included a link labeled “Your Credit Information.” When selected by the consumer, the link generated a “personal insurance credit inquiry,” which explains how credit was used to calculate that consumer’s auto insurance rate with the company and what factors in their credit history affected their rate.

Massachusetts is a state with some of the strictest bans in the nation regarding the use of credit information and socioeconomic factors in underwriting. Last month, Massachusetts Governor Deval Patrick signed into law a bill that codifies the state’s previous administrative ban on the use of credit scoring.

Progressive said it removed the credit information link from its website on Nov. 16 at the request of Massachusetts regulators. Some 3,200 Massachusetts consumers visited the site and received the credit inquiry information; however, that information was not used in calculating rates for Massachusetts consumers, according to the company.

“Our regulations make it very clear that carriers cannot use credit information in insurance rating or underwriting for Massachusetts drivers. This is a serious violation of those regulations and the public trust,” said Massachusetts Insurance Commissioner Joseph Murphy.

“Over the past three and a half years, we have created an auto insurance market that benefits Massachusetts consumers. Violations of the significant consumer protections we have in place will not be tolerated.”

In addition to the monetary penalty and requiring Progressive to remove the link from its website, state regulators are also requiring Progressive to contact every consumer who received the credit inquiry notification with an explanation of what happened and offer them a free check of their credit report.

In April 2008, the Massachusetts Division of Insurance changed the state’s auto insurance market from a fixed-and-established operation to a competitive market, which allows companies to set their own rates and compete for consumers. The state’s insurance regulators say the change has lowered insurance premiums by hundreds of millions of dollars, and has added 14 new companies to a marketplace that had only 19 carriers before the change to managed competition.

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