N.J. Changes, Challenges Lure Mercury General

By Mark E. Ruquet

NU Online News Service, July 29, 2:46 p.m.EDT?The chairman of California-based Mercury General Corp.said the firm's recently announced decision to enter the New Jerseyauto insurance market was brought on by recent regulatory reformand a belief there is enormous opportunity for growth.

George Joseph, who is also chief executive officer of the LosAngeles-headquartered insurer, said he believes recent changes inthe state's automobile insurance regulations gives his company achance to expand its business where others have feared to go in thepast.

"New Jersey's department of insurance and its [state]legislature decided to micro-manage its business for years," saidMr. Joseph in a telephone interview with NationalUnderwriter. "I think what we can see now is maybe thebeginning of less micro-managing of the business to encouragecompanies to come into that state.

"We think both the commissioner and the governor of New Jerseyrealized they have a serious problem and needed to find a way tomake New Jersey a place where companies want to do business asopposed to a place where companies can't wait to leave," hesuggested. "We think they have reached a turning point."

"We hope this is the beginning of a more competitive climate inNew Jersey," said Mr. Joseph.

"New Jersey is a state with a lot of automobiles, and that isour business," he continued. "When we started here in California,we had the same thing. A lot of companies shied away fromCalifornia. And some of them shy away right now. We've been throughthat."

He said his company has had a history of going into states whereothers fear to tread: taking up homeowners coverage when State Farmleft California; and going into Florida to sell auto policies in1998, when others were leaving. The company was formed inCalifornia in 1961 and began underwriting in that market in 1962.It writes over $2 billion in premium annually.

Mercury General, he said, does not have a problem being instates where there is micro-management of carriers, just as long asthey understand what is going on in the state.

"We are specialists in automobile," he said. "Our approach is tolearn the statute and the regulations very carefully and to findways to live within them. We have a reputation among independentagents that when we come to a state, we come to stay."

"We never entered a state where we could not overcome orunderstand what the statutes were," he added. "We look at NewJersey as a challenge, a big challenge. We are a company that isnot uncomfortable with challenge."

Mr. Joseph said that the company's application is nearlycomplete and hoped it would begin doing business in New Jersey sometime in August.

He said the company's practice is to carefully screen the agentsit decides to work with and have them go through a training periodof at least three weeks before beginning to sell insurance.

In the company's second-quarter financial release yesterday, thecompany said it plans to appoint 50 independent agents to initiallysell policies in New Jersey.

Eventually, Mr. Joseph said, the company will sell otherpolicies in the state because the agents and customers demand it.He said it is a matter of necessity, almost, especially inhomeowners because most customers like to have all theirproperty-casualty policies with one agent and agents like to haveit all with one company.

Of the eight states Mercury General writes in, it does not writehomeowners insurance in Texas, because "the situation is not clearthere," he said.

"Every time we go into a new state it's a challenge. It'sinteresting, it's a challenge, and we look forward to it," said Mr.Joseph about New Jersey. "We watch the results carefully and lookforward to the time when we make a profit. You almost never make aprofit in the first year in a new state. But we look forward togetting the agent's license and getting the business flowing. It'salways exciting going into a new state."