Progressive insurance was recently fined $125,000 by the Massachusetts Division of Insurance, because Progressive erroneously misinformed some Massachusetts consumers they had used credit scoring to determine their auto insurance rate through Progressive’s website.

You may not live in Massachusetts, but the circumstances regarding the fine imposed upon Progressive is something all auto & home insurance consumers should consider, when evaluating an insurance company’s complaint record, such as the complaint ratings I list on my website. Not all complaints are created equal, and sometimes you need to look deeper to see if an insurance company’s complaint record really means you will receive poor service.

Many states allow the use of credit to determine auto insurance rates, but Massachusetts is not one of them. If your state allows the use of your credit to determine your auto insurance rates, and you think it is unfair, you should start or join a grass roots movement to push your state legislators to pass a law prohibiting the use of credit for establishing insurance rates.

Massachusetts greatly limits what factors can be used for determining auto insurance rates. Prior to April 2008, Massachusetts actually set auto insurance rates, with all auto insurers charging the same price.

Starting in April 2008, Massachusetts now allows auto insurance companies to set their own rates, and compete for customers based on price. The good news is the new, competitive market has lowered auto insurance rates in Massachusetts, and 14 new auto insurance companies have entered the market, in addition to the 19 car insurance companies prior to April 2008.

If you live in Massachusetts, your auto insurance market is changing a lot each year due to the additional competition, and you are making a BIG mistake by not shopping for better auto insurance rates each year. If it’s been over a year since you checked for lower auto insurance rates, you are probably paying too much, & you need to start shopping now.

This article in the Insurance Journal discusses the fine against Progressive insurance in Massachusetts, and is the source of information for this blog post.

This is how I interpret what happened:

The disclosure about how Progressive uses credit information to rate auto insurance in other states was linked, in error, when Massachusetts consumers received online auto insurance quotes through the Progressive website.

Progressive does NOT use credit for determining its Massachusetts auto insurance rates, as required by law. No Massachusetts customers were quoted incorrect prices, based on their credit.

The link explaining the use of credit is similar to an online retailer making the mistake of explaining on its website a state sales tax applies to your purchase, when your state does not have a sales tax, and the retailer does not charge you the sales tax.

The only negative impact I see to Massachusetts auto insurance buyers, from the error made by Progressive, is potential customers were misinformed credit was to be used to determine their auto insurance rate quote. This may have discouraged some people from getting a quote, and finding what may have been cheaper auto insurance for them, by thinking their bad or mediocre credit would make the car insurance quote expensive.

In addition to paying the fine, Progressive has to notify the 3,200 people affected by the website programming glitch, explain the mistake, and offer them a free credit report check.

I think requiring Progressive to offer the free credit check, and to apologize for the erroneous credit disclosure is the proper punishment. But I also think the $125,000 fine is a lot to pay for a programming error, which did not result in a rating error, or a violation of Massachusetts law.

More importantly, to consumers checking insurance company complaint records, a fairly harmless complaint like this is as valid as a complaint against an insurance company for denying a legitimate claim.

Before you decide against an auto or home insurance company with a great price for you, based on its complaint record, check your state’s department of insurance website to find out more about the nature of the complaints against the insurance company.

An insurance company with a lot of complaints regarding claims should be a concern for you, where some complaints may not matter too much to you. You can find your state’s insurance department website on my State Department of Insurance Websites List.

A mistake like the mistake Progressive made in Massachusetts would not bother me much. But the case of bad behavior by Farmers Insurance I note in my Road Rage Not Covered by Auto Insurance blog post, should bother everyone.

An insurance company’s complaint record is a great tool for insurance shoppers, and I am happy to make hard-to-find complaint information easily available on my website & blog posts. My complaint ratings are certainly more objective than asking friends which insurance companies they like. But it is only one of the tools to use, in addition to other information I have on my website.

Always shop with all the leading auto & home insurance companies to find the lowest prices, then choose the insurance company with the best combination of price, coverage & service for you.

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