Mercury Insurance 2011 Annual Report Download - page 11

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105
100
90
85
02 0403 05 100907 0806 11
95
Combined Ratio vs. Industry
(in percent)
Mercury General U.S. Industry Source for industry data: A.M. Best Company
9
2011 ANNUAL REPORT
firmly believe that customers are better served
by obtaining the service and advice of an agent,
we cannot ignore the increased usage of the
Internet by consumers to buy insurance. For
many years now, we have provided customers
with the ability to obtain a quote on-line and, if
interested, be referred to an agent to finalize
the sale.
In 2011, we piloted a program in Georgia that
not only provides a quote on-line, but allows the
consumer to purchase a policy on-line. The
primary success factor we evaluated was
whether we sold more policies on-line compared
to the old process of providing a quote and
referring the customer to an agent. The results
of the pilot were that the close ratio increased
significantly when consumers were allowed to
purchase on-line.
Overall, the technology we developed that
allows for the sale of new business on-line and
also includes our agency partners in the
transaction, has performed well. Our agency
partners are assigned the on-line sale to service
the account and also attempt to cross sell other
products. We plan to expand this capability to
other states and to sell on-line in another state
by the end of 2012.
As loss costs rise, it is increasingly important
for us to obtain rate increases in California.
However, the regulatory environment in
California continues to be challenging. We
currently have a private passenger auto rate
increase of 6% pending with the Department
of Insurance and we are in the midst of a rate
hearing on our homeowners product. We will
continue to work with the Department of
Insurance on rate filings, but, if necessary, we
will exhaust all administrative and legal
remedies if we are unsuccessful in obtaining
needed rate from the California Department
of Insurance.
Progress is being made in states outside of
California. We continue to aggressively make
changes to our rating plans to improve our
segmentation and overall pricing adequacy.
However, our rate changes have not been
able to keep up with loss trends in some
states outside of California. For example, in
Florida, industry loss trends for personal
insurance protection coverage increased by
about 9% in the first three quarters of 2011
and that was on top of a 25% increase in
industry loss trends for 2010. Long term,
inflationary trends of this magnitude are not