Auto and property insurer Mercury General Corp. has been running television ads in California for years. But now viewers in 49 other states will start seeing them for the first time – even though people in most of those states can’t buy Mercury insurance.

The L.A. company last week launched its first national ad campaign, a curious move for an insurer that is licensed to sell policies in just 13 states and has never done much advertising outside of California, by far its biggest market.

But Mercury is in a push to bring in customers from outside the Golden State, and analysts and ad buyers say a national campaign could make sense for the company, despite its limited geography.

Mercury sells insurance in some of the most expensive media markets – including New York, Chicago and Los Angeles – meaning a national ad buy isn’t much more expensive than one targeted only to the places where it operates. What’s more, advertising in the 37 states where Mercury hasn’t been authorized by regulators to sell policies could boost a little-known Mercury side business that sells leads for prospective customers to other insurers.

Mary Jo Sobotka, chief integrated media officer with ad agency Phelps in Santa Monica, said it’s a smart marketing move.

“They said, ‘We want to buy the most efficiently and that’s on a national basis,’ ” Sobotka said. “ ‘Then we’re going to still service people in markets we haven’t expanded into.’ ”

Meeting demand

Insurance companies are big advertisers, investing heavily in campaigns with characters who sometimes gain their own notoriety – take Geico’s gecko, actor Dennis Haysbert for Allstate Corp. and Progressive Corp.’s red-lipped character Flo.

But unlike those nationwide firms, Mercury has done little advertising outside of its home state. But its new campaign, “Mercury Mission,” will feature a series of six commercials introducing Mercury agents as superheroes and will be seen by cable TV viewers across the country.

Erik Thompson, Mercury’s advertising director, said the company explored making media buys in the top markets of each state it operates in but realized a national campaign would be cheaper.

Sobotka said it’s not always cheaper to do a national campaign instead of going market by market, but that it is usually more cost-efficient – that is, a national campaign would likely cost less per viewer, even if it costs more overall.

But she cautioned that companies without a national presence – such as Mercury – run a risk airing ads nationwide: They might find themselves disappointing would-be customers who live outside of their service areas.

Mercury, though, has found a way around that problem, through its subsidiary Auto Insurance Specialists, or AIS. If a customer in one of the 37 states not served by Mercury tries to buy a policy through Mercury’s website, they are redirected to AIS.

That company collects customers’ information and provides quotes from other insurers, and gets a cut of any business it refers to those companies. Thompson said that means ads running in Idaho, Iowa and other states where Mercury can’t sell policies could still mean money for the company.

“We can send all of those leads to AIS in the states where we aren’t licensed to sell,” he said.

Stepping out

Vincent DeAugustino, an analyst who follows Mercury for Keefe Bruyette & Woods Inc. in New York, said Mercury has been discussing growth plans for some time. Though the company sells insurance in 13 states, California is its largest market by far, accounting for more than three-quarters of its revenue.

DeAugustino said the ad campaign speaks to the firm’s quest for more customers outside of its home state.

“They’ve been talking about, more recently, ramping up that growth initiative outside of the legacy focus in California,” DeAugustino said. “When I see a national ad campaign like this, it seems very much supportive of those growth plans outside of California.”

He’s less excited about the potential gains a national ad campaign could mean for the subsidiary AIS, noting that it likely makes up a tiny fraction of the company’s revenue. Mercury doesn’t break out revenue for AIS.

Still, DeAugustino said that in some states, sales commissions earned by AIS could theoretically earn Mercury just as much as actual insurance policies.

“If it’s a low-margin, highly competitive state – for example, Massachusetts – you may not want to underwrite there,” he said. “But if you could sell somebody else’s policy to that customer you happen to pick up from the ad campaign, that’s a win-win for Mercury.”