Mercury Insurance 2010 Annual Report Download - page 46

Technology
In 2010, the Company continued to enhance its internet agency portal, Mercury First. 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.
The NextGen system is designed to be a multi-state, multi-line system. NextGen serves as the primary
platform 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). During 2010, the
Company launched Guidewire, a commercially available software solution, for the Nevada homeowners line of
business to replace legacy platforms. The Company plans to implement Guidewire in other states during 2011.
In 2010, as part of the Company’s continuing commitment to service excellence, the Company broadened its
Astonishing Customers Everyday program, a streamlined loss application system which enhances the personal
auto claims process including automated rental car reservations, repair services, and a new roadside assistance
program. The Company also enhanced consumer web quoting capabilities and launched a new web page for
tracking vehicle repairs.
Subsequent Events
During January 2011, the Company announced a workforce reduction of approximately 165 employees,
primarily located in California. Approximately $4 million of severance related expense will be recognized during
the first quarter of 2011. The Company anticipates annualized savings from the workforce reduction of
approximately $11 million.
In early 2011, massive snowstorms affected the Midwest to Northeast regions of the United States and
brought blizzard conditions to much of the Country. Such events typically increase claims frequency and
severity; however, they occasionally decrease frequency as automobile drivers stay off the road due to business
closures. The Company is unable to determine what the impact, if any, from these storms will be.
B. Regulatory and Legal Matter
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.
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 2010, the Company implemented
rate increases in ten states and decreases in four states.
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.
During 2010, the Company received written approval from the California DOI for a private passenger
automobile rate filing that was originally made in July 2008. That rate filing was required by a 2006 regulation
that effectively reduced the weight that insurers can place on a person’s residence when establishing automobile
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