New Bay State auto insurer forges into market

Under managed competition, Progressive adds 10,000 clients

Progressive adjuster John-Michael Dillon examines a customer's car. The insurer has hired 65 people in Massachusetts since starting to write policies here. (Joanne Rathe/Globe Staff)

Julissa Vera is one of the first 10,000 Massachusetts customers to buy a Progressive Insurance automobile policy.

Vera, a program representative at the Metropolitan Boston Housing Partnership who recently moved to Somerville from Pawtucket, R.I., already insured her 2007 Honda Accord with Progressive, so when the company started selling policies in Massachusetts, she didn't have to change insurers.

"I'm happy with the company," she said.

Progressive of Mayfield Village, Ohio, is the first new company to start selling auto policies in Massachusetts as a result of a sweeping overhaul that went into effect April 1. Under the new system, insurance companies are free to set their own rates, subject to regulators' oversight, when previously they were told what rates they could charge.

Since it began Internet-only sales on May 1, Progressive has sold "more than 10,000" auto policies in Massachusetts, according to Cathy Wilton-Bransch, Progressive's product manager for Massachusetts. Progressive also has hired 65 people in Massachusetts, most of them claims processors and adjusters, and it plans to hire about 70 more by the end of the year, she said. The company plans to start selling auto policies through agents next year.

"Internally, we are very pleased," said Wilton-Bransch. "We have exceeded expectations."

More important than the volume, she said, have been high rankings from consumers in company surveys. She said in most states, about 65 percent of consumers will give Progressive the highest ranking possible when asked if they would recommend the company to a friend. In Massachusetts, 90 percent of customers are giving Progressive the highest ranking. Since they are new customers, many have not had any claims experience with Progressive.

At its current rate, Progressive would capture about 1 percent of the Massachusetts market by next May.

"It's not bad for a new entrant to the marketplace," said Peter T. Robertson, Massachusetts legal counsel to the Property Casualty Insurers Association. "The fact they're selling only over the Web to start with probably limits their penetra tion, because Massachusetts is a big agency market and so many people are loyal to their agents. The number of people who shop for auto insurance only on the Internet is pretty limited."

In addition to Progressive, three other insurers have taken steps to start selling auto policies in Massachusetts, including American International Group Inc., the world's largest insurer. Others are taking preliminary steps for permission to sell policies in Massachusetts.

"In only its first few months, managed competition is already delivering the results the Patrick administration intended," said Nonnie S. Burnes, the state insurance commissioner, in a statement. "Consumers' rates are going down dramatically, and they have more choices than ever before. We fully expect these benefits and others will continue as our reform transforms the auto market into one that truly works for Massachusetts drivers."

Some Massachusetts drivers say they have saved substantially when they switched coverage from another company to Progressive. However, neither state regulators nor Progressive have any solid statistics that show how much motorists are saving when they purchase policies from the company. Moreover, such a number might be confusing because it doesn't take into account the lower rates now offered at many insurance companies that already do business in the Commonwealth.

But Wilton-Bransch said Progressive can estimate savings from information entered on its website. Motorists who have used the website to get a rate quote and comparison quotes from three large auto insurers save an average of $270 a year compared with the next-best price, she said. She noted the savings might be exaggerated, because the rates from the other firms don't include group discounts, for which many drivers qualify.

"Clearly, the rate from a competitor will be lower than what we quote you on the website," she said.

Progressive has rankled some existing insurers by quoting rates for six-month policies, when existing insurers write only 12-month policies. Some think that tricks motorists into choosing Progressive.

"If it isn't outright deception, there's certainly a misunderstanding of the quotes consumers are receiving," said Doug Bailey, a spokesman for Arbella Insurance Group of Quincy.

Arbella was in third place in the Massachusetts auto market last year with a 9.4 percent share, and is one of the companies Progressive uses in its rate comparison tool. "We urge consumers, when they get a quote from Progressive, to give it to their agents for an apples-to-apples comparison."

A spokeswoman for Progressive said, "We believe our quotes provide apples-to-apples comparison, and we clearly disclose where policies are priced for six months."

Others have speculated that Progressive has intentionally priced its auto policies low at the start, to "buy" market share with artificially low prices. Wilton-Bransch dismissed those claims.

"We definitely don't price where we give away insurance and lose money," she said. "We're priced where we need to be for the long term."

The state Division of Insurance said it has received three complaints from consumers upset that the glass coverage they purchased from Progressive includes a deductible - something that isn't typical with glass coverage from other companies.

A Progressive spokeswoman said consumers have a choice and can buy policies with or without deductibles for glass coverage.

Jeffrey Krasner can be reached at krasner@globe.com.