Progressive Direct Insurance Co. has reached a settlement to pay $120,000 after allegations it provided Massachusetts auto insurance customers with inaccurate quotes on its rate comparison website.

Martha Coakley

Under the terms of an agreement, Progressive will pay both the state and overcharged customers, according to Massachusetts Attorney General Martha Coakley.

Coakley’s office alleged that Progressive offered “misleading and inaccurate” comparison rates for Arbella Mutual, Liberty Mutual and Commerce Insurance on its website.

A Progressive spokeswoman told IFAwebnews.com the insurer did indeed make “mistakes in calculating and programming rates,” resulting in inaccurate comparisons and was “sorry we let this happen.”

In advertisements seen nationwide, Progressive says it will instantaneously provide comparison quotes for its competitors when a driver seeks a quote on its website, a service it began for Massachusetts customers starting on May 1, 2008.

Progressive’s alleged inaccuracies included the quoting of prices for 12-month policies, while stating the quote was for a 6-month policy instead, Coakley’s office said. The company also stopped offering comparison quotes through its call centers to consumers in Massachusetts.

The attorney general’s office said Progressive is not offering comparison quotes to consumers in the state.

Cristy Cote of Progressive’s media relations department said when the insurer discovered the errors, it shut down the comparison service and notified state insurance regulators and Coakley’s office. Cote said Progressive “offered to pay the difference for those customers who bought a Progressive policy when a competitor’s rate was lower, if the customer chose to switch their coverage to that competitor.”

She said the insurer “fully cooperated” with an investigation and was “glad to put this matter behind us.”

Preserving competition

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

Cote said Progressive understands the attorney general’s role is customer protection and “we wholeheartedly support that goal.”

“We also share the attorney general’s view that companies should be held to high standards and we are prepared to meet that standard in Massachusetts just as we do in every other state,” she said.

Coakley’s office also alleged that Progressive failed to obey its own rating practices filed last year, indicating the insurer would not charge consumers or additional drivers listed on their policy that carried his or her own insurance. The attorney general’s office claims Progressive charged some Massachusetts policyholders higher rates to include already insured drivers on their policies.

Progressive also agreed in its filing last year that it would send a transfer notice to a customer’s former agent or insurance company stating that it was the new insuer, but Coakley’s office said that it failed to do so in “many instances.”

Progressive agreed to address both situations through the settlement agreement.