Since Massachusetts stopped setting auto insurance rates three years ago, 13 new companies have stormed into the market, including industry giants like Geico, Allstate and Progressive. A 14th firm, General Casualty of Sun Prairie, Wis., is expected to start selling insurance in the state next year.
But the country’s largest auto insurance company, State Farm Mutual Automobile Insurance Co., has so far stayed out of Massachusetts, depriving the market of a competitor that has the size and scale to grab market share and potentially push premiums lower. State Farm insures about one in five cars nationwide.
But State Farm said it is still monitoring Massachusetts to decide whether the potential earnings justify the costs of moving into a new market.
Unlike firms such as Progressive and Geico, which serve customers largely through their websites and call centers, State Farm operates primarily through a network of local agents. A move into Massachusetts would require the Illinois-based insurer to hire scores of local agents.
A State Farm spokesman said the company must consider a number of factors when it enters a new market including rates, pricing, existing competition, and the overall regulatory and statutory environment.
“State Farm will continue to assess the Massachusetts insurance market to determine if it would be in the best interests of our policyholders to start marketing business’’ here, said company spokesman Doug Nadeau.
If State Farm eventually does decide to enter the market, it would be the strongest sign yet that the market has become more competitive under new rules implemented by Governor Deval Patrick’s administration.
Many large insurers traditionally avoided the Massachusetts market, because the state dictated how much companies could charge customers. But in 2008, the state began giving companies much more freedom to set their own rates, a change it called “managed competition.’’
Insurance Commissioner Joe Murphy said the state’s move to reduce regulations has provided more options for customers and helped reduce rates. He said the state has nearly doubled the number of insurers - to 33 from 19 - over the past three years. Insurance premiums fell for two straight years before rising about 4 percent last year.
Still, overall rates are lower than they were before the new rules went into effect. Auto insurers collected $3.7 billion in premiums last year, down 8 percent since 2007, though some critics say rates probably would have fallen anyway.
Murphy said he hopes more companies, including State Farm, enter the market. Murphy said he has not had recent conversations State Farm, but has chatted with them in the past.
“We’d love to have them,’’ Murphy said. “We have some healthy competition, and we’d love to have some more.’’
The state is trying to encourage customers to shop around for insurance. Despite the advent of increased competition, Murphy said many customers have stuck with their existing insurers out of habit, instead of searching for better deals.
Indeed, the biggest legacy insurers in the state have largely retained their dominance, despite increased competition from new entrants. Commerce Insurance Co. had 28.2 percent of the consumer market last year, down from 31.9 percent in 2007, but was still the state’s largest auto insurer by a wide margin. Safety Insurance Co., the second largest, had about 11 percent of the consumer market, similar to what it had three years earlier.
But some newcomers have gained customers. Progressive, one of the first major new companies to enter the market in 2008, had about captured 3.3 percent of the consumer market by the end of last year.
Murphy said the state plans to stick with its approach to expanding competition and giving firms more freedom to set their own rates. “I have no intention of touching the regulations we have in place,’’ Murphy said. “We want to let the market mature and get some new companies in here.’’
Todd Wallack can be reached at twallack@globe.com. Follow him on Twitter @twallack.