Progressive Agrees to Pay Massachusetts Fine

Progressive Direct Insurance Co., which has long compared its rates to competitors, agreed to pay the state $120,000 to settle charges that it inflated the rates for rival companies, Massachusetts Attorney General Martha Coakley announced today.

Specifically, Coakley's office accused Ohio-based Progressive, the nation's fourth largest automobile insurer, of inaccurately comparing its six-month rates to the 12-month rates offered by other companies, such as Arbella Mutual, Liberty Mutual, and Commerce Insurance. Progressive inaccurately listed all the rates on its web site as six-month prices.

Progressive, which started offering policies in Massachusetts on May 1, 2008, stopped quoting rivals' rates on its web site and through its call center late last year, and notified Coakley's office about the mistake.

“For competition to truly work in Massachusetts, consumers must be able to easily access accurate information about rates from insurance companies,” Coakley said. “Progressive’s failure to provide correct comparison quotes harmed consumers and harmed Massachusetts’ ability to introduce a competitive system in automobile insurance.”

In addition, Coakley's office said Progressive failed to follow its own official rate practices, filed with the state's Division of Insurance, by charging consumer to list additional drivers on their policies who already carried their own insurance. Progressive agreed to reimburse drivers who were improperly charged.

Coakley's office also complained that Progressive frequently failed to notify customers' former insurer when a customer switched auto insurance companies. That in turn led some insurers to cancel customers' policies for nonpayment - instead of just closing the accounts when customers switched to Progressive - potentially hurting customers' credit scores. Progressive agreed to help any customers who were affected.

Progressive spokeswoman Cristy Cote acknowledged the company mistakenly calculated the rates for some competitors when it began offering insurance in Massachusetts last May.

But the company noted that it shut down the service and notified state regulators and competitors after it discovered the errors. It also said it offered to pay the difference for customers who bought its policy when a competitor actually offered a lower rate, provided the customer wanted to switch to the other firm. The company said it also cooperated with Coakley's probe into the other issues.

"We understand that the attorney general’s role is to protect consumers and we wholeheartedly support that goal," Cote said in a written statement. "We are glad to put this matter behind us."

(By Todd Wallack, Globe staff)