Division of Insurance Fines Progressive Direct $125,000 for Violation of Ban on Credit Information

BOSTON, Dec. 12 -- The Massachusetts Office for Consumer Affairs and Business Regulation issued the following news release:

The Patrick-Murray Administration's Division of Insurance today announced a $125,000 financial settlement with Progressive Direct Insurance Company, after the company erroneously informed some Massachusetts consumers that they had used credit information to determine their automobile insurance rate through its website.

Starting in September 2010, Progressive's website included a link labeled "Your Credit Information," which if selected by the consumer, resulted in a "Personal insurance credit inquiry for (consumer's name)" being generated, which explains how credit was used to calculate that consumer's auto insurance rate with the company and what factors in their credit history favorably and/or unfavorably affected their rate. State regulations (211 CMR 79.05(13)) do not allow for credit information to be used in underwriting or rating of private passenger automobile insurance in Massachusetts.

Progressive removed the credit information link from its website on Nov. 16, at the request of the Massachusetts Division of Insurance. Approximately 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 Joseph G. Murphy, the Commissioner of Insurance. "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, the Division of Insurance also is 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 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 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. The reforms also included consumer protection regulations, including restrictions on the use of credit and income, marital status, occupation, and homeownership in the rating and underwriting of private passenger auto insurance.

On Nov. 23, 2011, Governor Patrick signed into law a restriction on the use of credit information when underwriting or rating private passenger automobile insurance. While the law is similar to the existing DOI regulations, it creates legal permanency to these restrictions.

"The Division of Insurance has had no intention of changing its regulations, but Governor Patrick's signing of the legislation codifies and strengthens our intent to protect consumers and create a marketplace that offers choice in cost, coverage and company," said Barbara Anthony, the Undersecretary of the Office of Consumer Affairs and Business Regulation.

The Massachusetts Division of Insurance (www.mass.gov/doi) is an agency within the Patrick-Murray Administration's Office of Consumer Affairs and Business Regulation. Follow the Office at www.mass.gov/consumer, its Consumer Connections Blog and at its Twitter feed, @Mass_Consumer.

TNS hc1-111217-JF78-3719884 StaffFurigay