Progressive Raising Rates ; Other Mass. Auto Insurers Angry

By JAY FITZGERALD

Known for its super-cheap auto insurance in Massachusetts, Progressive Insurance is now progressively raising its rates.

Ohio-based Progressive, which drove into the states recently deregulated insurance market with low premium offers that left many rivals in its rear-view mirror, will increase its premiums by an average of 4.9 percent on Wednesday.

Progressive, which plans to soon offer insurance for motorcycles and recreational vehicles, called the auto-premium increase a normal adjustment after being in the Massachusetts market for nearly a year.

Despite the planned hike, Progressives prices are still low compared with many rivals, some of whom are also tweaking their own rates upward after a year of intense price competition.

Some rivals say Progressive's move is a textbook example of a newcomer arriving in a market, offering super-low rates and then jacking up prices after it has lured customers to its products.

"This is keeping with their strategy," said Doug Bailey, a spokesman for Quincy-based Arbella Insurance, which says it will soon lower its average rate by about 2 percent under the states new managed-competition market.

Arbella has been an outspoken critic of Progressive and of state Insurance Commissioner Nonnie Burnes. Arbella is suing the state for allegedly giving unfair competitive breaks to new insurance companies that enter the Massachusetts market.

Burnes, who led the way for the Patrick administrations deregulation of the auto-insurance industry, has rejected Arbella's unfair-competition claims. In a statement late last week, she dismissed criticisms that Progressive is now hiking its prices.

"It's clear were seeing (some) positive signals from the industry," she said, apparently referring to price competition and insurance-industry giant Geico's announced plans to enter the Massachusetts market in May.

Insurers are eagerly awaiting release of Geico's planned rates, under the assumption that it will deploy a similar tactic as Progressive: come in with low prices to attract attention and customers. Geico's rates won't be released until Burnes office officially reviews and OKs Geicos application to do business here.

"They are a tremendous competitor," Cathy Wilton-Bransch, Massachusetts product manager for Progressive, said of Maryland- based Geico, a subsidiary of Warren Buffett's Berkshire Hathaway.

Wilton-Bransch dismissed criticism from rivals that Progressive is jacking up prices now that it controls an estimated 1.2 percent of the Bay State auto insurance market.

"There's talk out there that there's a bait-and-switch (tactic) and, frankly, that type of (rhetoric) makes me a little angry," said Wilton-Bransch, whose firm offered price cuts of about 20 percent last year, after Progressive entered the Massachusetts market.

Indeed, some insurance industry officials privately say Progressive's actions amount to nothing more than classic capitalism: offer specials, undercut the competition and establish a market foothold.

"What's wrong with that?" said one industry insider, who asked not to be named.

But Arbella's Bailey said insurance isn't like a lot of other products. Once customers sign up with an insurer, they usually stick with them, allowing insurers to later increase prices.

- jfitz@bostonherald.com

Originally published by By JAY FITZGERALD.