Mass. Fines Progressive for Providing False Credit-Scoring Info

Progressive logoMassachusetts regulators have fined Progressive Direct Insurance $125,000 for wrongly telling thousands of consumers that the company had used their credit histories as a factor in setting their premiums, despite the fact that the practice is prohibited in the state.

The state Division of Insurance announced this week that a settlement had been reached with the company, which reportedly informed consumers on its website starting in September 2010 that their credit histories had been used to calculate their vehicle coverage rates.

An estimated 3,200 Massachusetts residents clicked on a link that generated their credit information and detailed which factors in their credit histories favorably or unfavorably affected their scores, state officials said.

“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,” Commissioner of Insurance Joseph Murphy said in a news release. “Violations of the significant consumer protections we have in place will not be tolerated.”

Insurer use of consumer credit information is a contentious issue in Massachusetts, where Gov. Deval Patrick last month signed into law a bill barring auto insurers from considering consumer credit histories when setting premiums, superseding an existing administrative ban on so-called “insurance scoring.”

Credit cardsThe administrative ban was said by some—including the Massachusetts Association of Insurance Agents (MAIA)—to offer insufficient protection.

Massachusetts is one of only three states nationwide with bans on auto insurer use of credit histories for rating purposes.

Insurers support the use of a person’s credit history as a tool to help set rates, claiming statistics show that credit status is a reliable predictor of risk that allows coverage providers to set rates with greater accuracy.

MAIA and other critics, however, say the practice unfairly punishes low-income consumers by basing rates on factors that have nothing to do with driving. MAIA officials say consumers who are checking out auto insurance quotes in Massachusetts should not be charged more for having a few blemishes on their credit history, and monthly premiums should be based as much as possible on driving records and years of experience behind the wheel.

A Federal Trade Commission (FTC) study found that credit scores do appear to correlate closely with the rate and size of claims filed, but exactly why is unclear.

After hearings before a joint House and Senate committee last month, MAIA pulled the plug on a ballot initiative in order to instead have a bill banning insurance scoring passed. The compromise legislation outlaws the use of credit histories but not education or job histories, which will still be prohibited only by administrative regulations.

To research how Progressive performs when handling claims, consumers can read user-submitted Progressive auto insurance reviews online.

About Matthew Morisset
Matthew Morisset is a proud alumnus of the University of Redlands, where he obtained a degree in English Literature. Utilizing his passion for analysis and writing, Matthew looks for important trends in the auto insurance industry and their implications for consumers and the market as a whole.

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