Mercury Insurance 2009 Annual Report Download - page 54

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positive to negative and were negative 6% in 2009. In management’s view, 2004 through 2007 was a
period of very profitable results for companies underwriting automobile insurance. Many in the
industry have experienced declining profitability since 2007. During 2009, many of the Company’s
largest competitors have increased rates on both private passenger auto insurance and homeowners
insurance. Rate increases generally indicate that the market is hardening.
Technology
In 2009, the Company continued the implementation of its internet agency portal, Mercury First, which is
now in use in New York, Virginia, and Florida. The Company plans to roll out Mercury First to the remaining
states in which it operates with private passenger auto in 2010 and several states with homeowners and
commercial auto in 2011. Mercury First is a single entry point for agents providing a broad suite of
capabilities. One of its most powerful tools is a Point of Sale (POS) system that allows agents to easily obtain
and compare quotes and write new business. Mercury First is also an easy-to-use agency portal that provides a
customized work queue for each agency user showing new business leads, underwriting requests and other
pertinent customer information in real time. Agents can also assist customers with processing payments,
reporting claims or updating their records. The system enables quick access to documents and forms and
empowers the agents with several self-service capabilities. Additional POS solutions for commercial auto and
homeowners lines are planned to be in use in 2010.
The Company has developed a NextGen computer system to replace its legacy underwriting, billings, claims
and commissions systems for private passenger auto. The NextGen system was designed to be a multi-state,
multi-line system to enable the Company to enter new states more rapidly, as well as to improve response times
to legislative and regulatory changes. The Company has completed the rollout of NextGen for all underwriting,
billing, claims, and commission functions supporting the private passenger auto line in seven states (Virginia,
New York, Florida, California, Georgia, Illinois, and Texas), and expects that NextGen will be implemented in
the remaining states in which the Company operates during 2010 and 2011. During 2009, the Company entered
into a pilot program with Guidewire, a commercially available software solution, for the homeowners line of
business to replace legacy platforms. Guidewire implementation will begin in 2010.
As part of the Company’s commitment to service excellence, the Company launched an initiative in 2008 to
improve its call center technologies. The initiative’s goal is to enhance telephony infrastructure using Voice over
Internet Protocol, centralized call recording, quality monitoring, and workforce management software. The
technology has been integrated with the Company’s claim processing software and deployed to the centralized
customer service call center. The Company also implemented Astonishing Customers Everyday in 2009, a highly
streamlined loss application system which enhances the personal auto claims process including automated rental
car reservations, repair services, and a new roadside assistance program.
B. Regulatory and Legal Matters
The process for implementing rate changes varies by state, with California, Georgia, New York, New
Jersey, Pennsylvania and Nevada requiring prior approval from the respective DOI before a rate may be
implemented. Illinois, Texas, Virginia, Arizona, and Michigan only require that rates be filed with the DOI,
while Oklahoma and Florida have a modified version of prior approval laws. In all states, the insurance code
provides that rates must not be excessive, inadequate, or unfairly discriminatory. During 2008, the Company
implemented automobile and homeowners insurance rate decreases in California. During 2009, the Company
implemented automobile rate increases in four other states and a decrease in one other state.
The California DOI uses rating factor regulations requiring automobile insurance rates to be determined in
decreasing order of importance by (1) driving safety record, (2) miles driven per year, (3) years of driving
experience, and (4) other factors as determined by the California DOI to have a substantial relationship to the risk
of loss and adopted by regulation.
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