Auto Choice Legislation
So far, the rate cuts haven't been deep enough to hurt Chubb car insurance company profits, said an analyst with Warburg Dillon Read. A lot of publicly traded insurers have seen their stocks increase this year. Allstate's is up 10.64% so far, and Progressive's is up 26.49%.
But the competition will probably engender further rate cuts--and more aggressive marketing, said Blair Sanford, an analyst with Hoefer & Arnett in San Francisco.
"Rates are coming down faster than costs, which is shrinking the profit margin for these companies," Sanford said. "My opinion is that you're going to get companies butting heads a lot more" as they fight for customers.
Companies for example Progressive, Mercury and 20th Century Insurance Group have by now taken the straight out approach, using television and print ads and Internet World Wide Web sites to balance their rates with other insurers'.
The ads--and subsequent word of mouth--worked for Jeff and Lori Rogers, who moved this year from the Santa Ynez Valley to Saugus. Lori Rogers, 34, had been insured by State Farm from the time when she started driving at age 16, although worried that their move nearer to an urban area would make their premiums excessive.
"I knew that our rates were going to go up, so I started shopping around, and a friend recommended 20th Century," Rogers said. "We were able to put both cars on the same policy for what it would have cost us to insure one" with their former company.
Progressive has taken up a modern, high-touch loom in which accident reports are beamed automatically from a central office openly to the laptop computers of its adjusters, who roam Los Angeles and Orange county streets in a fleet of 26 white Ford Explorers. The adjusters can turn out reports and checks on manageable printers installed in the back of the vehicles.
"We've had occasions where the adjuster arrived on the accident scene before it even cleared and wrote a check," said David Pratt, Progressive's Southern California general manager. Even less destructive marketers have bowed to rate cutting and service improvements to protect their market share.
The Automobile Club of Southern California cut its rates by 25% over the last five years, transforming it from one of the state's more expensive insurers to one of the less expensive, Chief Executive Tom McKernan said. "People trust the brand, they want the brand, but they're not going to pay a huge price difference," McKernan said.
Mail and Internet quote services have been added so possible consumers can comparison-shop unswervingly, without going through agents.
"I don't like the service with an intermediary," said Long Beach resident Angela Martini, a substitute teacher who switched to the Chubb auto insurance after years with Mercury, which sells through agents. "You have to talk to your agent, who has to get back to you.”
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