Mercury cutting rates in state
Mercury General Corp., a Los Angeles-based low-cost insurer, today is expected to announce rate cuts for about 1.7 million of its automobile and homeowner insurance customers, mainly in Southern California.
Most of the cuts will go to automobile policyholders and, perhaps, offset at least a little pain from weekly hikes in gasoline prices.
The owners of 1.5 million cars will shave 3% off their annual bills, about $30 per vehicle, according to the California Department of Insurance. Savings statewide should total $41 million a year. Mercury is the third-largest auto insurer in California, with 9.7% of the market.
The auto rate reductions were based partially on new state criteria that downplay the importance of the ZIP Code where a car is typically parked overnight. The cut took effect in May but had not been announced, the department said.
Mercury Chairman George Joseph and California Insurance Commissioner Steve Poizner have scheduled a news conference in Los Angeles this morning to announce the rate cuts officially.
“Mercury is exemplifying consumer-friendly and smart business practices by passing company savings on to their policyholders,” Poizner said Tuesday. He said he had been pushing companies to drop rates when merited.
California has had the country’s most heavily regulated insurance business since voters approved Proposition 103 in 1988. As commissioner, Poizner must approve every request for a rate hike or cut.
Douglas Heller, a consumer advocate from Santa Monica-based Consumer Watchdog, who has tangled repeatedly with Mercury over enforcement of Proposition 103, said he was “pleased to hear that Mercury is not just lowering its rates but is coming into compliance with the consumer protections it has fought for 20 years.”
Mercury’s new rates for homeowner insurance, which take effect in August, will drop by 10% for 224,000 customers. That represents individual savings of about $100 a year for homes in Southern California and $83 elsewhere in the state.
Renters’ premiums will drop by 33%, saving approximately $85 a year for Mercury’s customers in Southern California and slightly less in other parts of the state, the department said. The company is the state’s eighth-largest homeowner carrier, covering about 3% of insured dwellings.
The savings should be a big help for renters, about 40% of California’s population, especially those who may have lost their previous homes to foreclosure because of the sub-prime mortgage crisis, the department said.
Under Poizner, savings from a number of automobile rate reductions totaled about $1 billion for 2007 and so far in 2008. Homeowners’ savings during the same period were $558 million, the Department of Insurance said.
Mercury’s cuts in auto rates are in line with recent industry trends in California. For the last few years, insurance companies have earned strong profits with declines in accident frequency and severity.
Homeowners’ rates also declined under pressure from regulators but may be poised to rise again, industry analysts said. The state’s three biggest companies, covering more than half of insured homes, have requests for rate hikes pending.
“It’s been festering for a while,” said Sherwood “Woody” Girion, the deputy commissioner for rate regulation. But Mercury, he said, is “breaking away from the pack” in lowering homeowners’ prices.
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