There's a new player in the homeowners insurance market: Auto insurance giant Progressive Corp. began offering home policies in Arizona in mid-March, and if the response there is positive, the company intends to expand throughout most of the U.S.

"We expect to be in four states by the end of the year," says Progressive's homeowners general manager John Barbagallo. Progressive intends to eventually sell home insurance in all 48 states where it sells auto insurance (everywhere except New Jersey and Massachusetts).

The company says the move comes in response to consumer demand. "It's part of our overall strategy to provide consumers with more services," says Barbagallo. Progressive hopes to see increased auto insurance sales as a byproduct of selling homeowners policies.

"We've often heard that a barrier for some consumers is that we don't give them the opportunity to bundle their auto and home insurance," explains Progressive spokesperson Leslie Kolleda, who describes Arizona as "a litmus test of success" for Progressive's home insurance sales.

Progressive will use "replacement cost estimator" software that looks at details such as the location of the home, the number of occupants, type of flooring, number of fireplaces, and unique features. The company also breaks down the list of "insured perils" in a basic home insurance policy, and analyzes the risk for each peril for each policy. And instead of changing rates every year based of inflation, Progressive plans to archive the detailed information on each home and then run that list through its cost estimator at renewal time.

The bottom line, according to Progressive officials, is that homeowners shouldn't end up being under or over insured.

One area that the software program won't cover is the replacement cost of personal possessions. Homeowners will still need to gather documentation on the contents of their homes, and keep that information in a secure location. But Barbagallo says the company hopes to be able to meet that need in the future, with software that would help maintain a list of possessions. "We would like to address that concern with a content-loss estimator," he explains. "But that's a couple-year process for us."

Progressive's homeowners insurance policies are being offered initially by independent insurance agents. Company officials hope to add telephone and Internet sales and also plan to make the replacement cost estimator available for use on the Web.