Mercury Auto Insurance Rates to Be Cut by Millions in Calif.

Illustration of downard arrow and money signsA change to Mercury Insurance’s rating plans will result in California car insurance premium reductions that should total an estimated $72 million next year, according to the coverage provider.

Mercury — the fifth largest auto insurance provider in California — stated in a press release that new and current policyholders will save an average of $36 per vehicle when the new rating formula takes effect.

“Mercury’s already low rates are now even lower, and we’ve added some great benefits to bring even more value to our California customers,” said Mercury’s chief product officer, Robert Houlihan, in the release.

There were conflicting reports, though, about the reason for the rate change.

Car coverage providers are required every year to submit their rating plans — the formulas through which individuals’ personal driving and demographic factors are analyzed to assess risk and assign appropriate rates — to the Department of Insurance (DOI) for review. This is done to ensure that rates aren’t excessively high or excessively low. Sometimes the formula proposed by an insurer raises rates from the previous year; sometimes it lowers them.

According to the non-profit Consumer Watchdog group, the $72 million in savings will come because the DOI forced the company to lower its rates.

According to Mercury, the company requested the downward rate change, and the savings will come as a result of the DOI’s granting approval.

What happened is that Mercury originally requested approval for a change to the ratings formula that included a total premium increase of between $8 million and $32 million, according to Molly DeFrank, a California DOI spokeswoman.

After reviewing the rating request, the department rejected the rate increase of between .05 percent and 2 percent and informed Mercury that the maximum rate allowable would include an almost 4.5 percent decrease.

“Mercury revised their rate requests for their programs to meet these amounts, and the Department approved those requests,” DeFrank said.

About Ben Zitney
Benjamin Zitney has been covering the auto insurance industry for the past 2.5 years. Before coming to Online Auto Insurance News, he produced an extensive company history of the 30-year-old California Joint Powers Insurance Authority and worked at the Cal State Long Beach Daily Forty-Niner as a reporter, copy editor and news editor.

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