<PAGE>
                                                                    EXHIBIT 10.1
 
                            MERCURY INSURANCE GROUP
                                        
                               PRODUCERS CONTRACT

The undersigned producer and company(s), hereinafter called Producer and
Company, agree that these provisions apply to the signatory company(s), and the
producer:

1.   Producer as designated in this agreement shall mean broker.

2.   The territory within which the Producer may act shall be the State of
     California.

3.   This contract shall become effective on the day it is signed by an officer
     the Company.

4.   The Producer has authority to solicit applications for insurance for such
     classes of risks as the Company may authorize to collect, receive, and
     receipt for premiums on insurance tendered by the Producer to and accepted
     by the Company; and to receive commission on paid premiums as full
     compensation on business placed with the Company as stated in the attached
     commission schedules.

5.   The Producer shall promptly forward applications and required premiums to
     the Company and may bind insurance in accordance with the Producer's
     Manual.

6.   The Producer shall refund ratably to the Company, on business, heretofore
     or hereafter written, commissions on canceled insurance and on reduction in
     premiums at the same rate at which such commissions were originally paid.

7.   If premiums are to be billed by the Producer, the Company will bill the
     Producer monthly.  The balance therein shown to be due to the Company shall
     be paid within 15 days after the billing date, otherwise such policies
     shall be subject to cancellation 10 days thereafter.  The Producer shall be
     responsible for and agrees to pay to the Company all premiums on policies
     written with the Company whether collected by the Producer or not.
     Premiums billed by the Company, direct to the Insured, shall be the
     responsibility of the Company.  The producer is authorized to deposit in a
     Federally Insured savings account, term deposit account or time certificate
     of deposit (of any combination thereof) any part or all of the premium
     funds collected by the agent an behalf of the Company, and is entitled to
     retain any Interest which accrues on sold premium funds.

8.   Commissions Statements for direct bill policies shall be rendered monthly,
     and any balance due the Company shall be paid within 15 days after the
     statement is mailed.  Any balance due the Producer may be offset by any
     other amounts due the Company by the Producer.

9.   The Producer has no authority to make, alter, vary, or discharge any policy
     contract to extend the time for payment of premiums except as authorized in
     writing by the Company to waive or extend any policy obligation or
     condition; to incur any liability in 
<PAGE>
 
     behalf of the Company, or to engage in advertisement respecting the Company
     without the prior written consent of the Company.

10.  The Company shall not be responsible for any producer expenses.

11.  Any Company supplies furnished to the Producer by the Company shall remain
     the property of the Company and shall be returned to the Company or its
     representative promptly upon demand.

12.  In the event of termination of this contract, provided the Producer shall
     pay amounts due the Company within thirty days of the billing date, the
     Producer's records, use and control of expirations shall remain his
     property and be left in his absolute possession.  If the Producer does not
     pay the statements as provided above, title to the records and expirations
     shall transfer to the Company for its exclusive use and control.  If
     premiums due the Company are disputed, the Producer shall nominate a
     national accounting firm to render an Independent accounting.  The
     nomination must be made in writing within ten days after receipt of the
     monthly statement.  If demand for an accounting is not made within ten
     days, future agreement to Independent accounting will be at the option of
     the Company.  Premiums found due shall be paid within ten days of the date
     the accounting firm renders its opinion.  Expenses of the Independent
     accounting will be shared equally by both parties.

13.  This contract supersedes all previous contracts or agreements whether oral
     or written between the Company and the Producer and shall remain in effect
     until terminated by either party at any time upon written notice to the
     other.

14.  The Producer shall not appoint sub agents to represent the Company without
     the written consent of the Company.  The Producer is not to accept business
     for the Company from any other agent or broker.

15.  The Producer will not transfer ownership of the policies written the
     Company, or allow another producer or broker to renew or service the
     policies without the prior written approval of the Company unless this
     contract has been terminated and all amounts due the Company have been
     paid.

16.  If the Producer is a corporation, it is agreed that ownership of any stock
     may not be sold, transferred or additional stock issued without consent of
     the Company.  This provision shall not apply if the Producer is a publicly
     held corporation under the Security Exchange Act of 1934.

17.  It is agreed that the Producer shall not submit broker of record letters on
     existing Mercury polices or rewrite Mercury policies written through other
     producers of the company without the prior consent of the Company until the
     producer has written at least $500,000 in premiums with the Company.
<PAGE>
 
18.  The Company will allow the Producer an additional contingent commission on
     the Net Result of business produced by the Producer for the Company on the
     basis hereinafter set forth for each calendar year.  The rate of said
     contingent commission to be as follows:

<TABLE>
<CAPTION>
                  RATE                             NET EARNED PREMIUM
                                                       OF AT LEAST:
                  <S>                                 <C>

                  15%                                   $ 50,000
                  20%                                    100,000
                  25%                                    150,000
                  30%                                    200,000
</TABLE>


The net result shall be computed as follows:

                                     INCOME
     Net premium earned shall be gross premiums earned net of reinsurance cost
     to the Company, assessments for guarantee funds and loading for assigned
     risk plans, reinsurance facilities and joint underwriting authorities.

                                     OUTGO

     A flat deduction of 30% of net earned premiums.

     A deduction equal to the average commission rate paid the producer on
     premiums earned during the calendar year.

     Net Losses incurred shall be gross losses incurred less reinsurance
     recovered or recoverable.

     Deficit, if any, from previous year's contingent account.  (Deficit of any
     individual year to be carried forward one year only.)

     The difference between the Income and Outgo shall constitute the Net
     Result, and contingent commission thereon at the rate as set out above will
     be paid to the Producer, but not before August 31st following the end of
     the contingent year.

     The net results referred to above shall include premiums and losses
     resulting from all forms of Insurance written by the Producer for the
     Company.

     It is a condition of this agreement remittances for all items and balances
     shall reach the Company within a period of time in accordance with the
     conditions and provisions in the Producer Contract.  Otherwise, no
     contingent commission shall be payable.
<PAGE>
 
     If the Producer Contract is terminated by either the Company or the
     Producer, no contingent Commission  shall be payable on business produced
     in the year in which termination occurs.  This applies even if the business
     is transferred to another Producer of the Company.

19.  The Producer agrees to reimburse the Company for any expense, attorney's
     fees, loss or damage sustained by the Company by reason of the Producer's
     violation of, or failure to conform to any of the provisions of this
     agreement.

IN WITNESS WHEREOF, the Company has caused this contract to be signed at the
Home Office and the Producer has subscribed his name hereto this __________ day
of _______________________.

By____________________________________      Title_____________________________
   MERCURY CASUALTY COMPANY
   MERCURY INSURANCE COMPANY
   CALIFORNIA AUTOMOBILE INSURANCE
   COMPANY


Producer______________________________      Title_____________________________
<PAGE>
 
                              COMMISSION SCHEDULE

The Producer is authorized to represent the Companies below for the classes of
risks indicated and receive commissions at the rate shown, except for commission
rates on certain classes of risks designated in the producers manual.

PERSONAL LINES

  Automobile:  Mercury Casualty Company .......................................

               Mercury Insurance Company & California Automobile Insurance
               Company.........................................................

  Personal Protection Package (Automobile, Homeowners and Umbrella)............

  Personal Umbrella Policy.....................................................

  Homeowners...................................................................

  Dwelling Fire................................................................

COMMERCIAL LINES

  Automobile...................................................................


Commission rates for Mercury Insurance Company, Mercury Casualty Company,
California Automobile Insurance Company, Personal Lines Automobile and Personal
Protection Package policies are subject to the following adjustments:

1.   The rate of commission shown in the commission schedule shall be the base
     commission rate.  The maximum rate of commission payable shall be 20%.

2.   The commission rate from the effective date of this agreement to the second
     June 30th following the first accounting period will be the base commission
     rate.  The commission rate will be subject to modification for policies
     effective each twelve month period thereafter.  The commission rate in
     effect during the previous twelve months may be increased or decreased by
     1% of the premium.

3.   The first accounting period for Mercury Insurance Company, California
     Automobile Insurance Company and Mercury Casualty Company private passenger
     auto policies, shall be the three year period ending December 31, in the
     year the producer has had a contract in effect with the company either as
     an agent and or broker for three or more years.  Otherwise, the first
     accounting period begins with the effective date of this agreement and ends
     December 31st in the year this agreement has been in effect for three
     years.
<PAGE>
 
4.   The first Accounting Period for Personal Protection Package policies shall
     be the period beginning with the effective date of this agreement and
     ending December 3lst of the year in which it has been in effect for one
     year.  The second Accounting Period shall be the period beginning with the
     effective date of this agreement and ending December 31st of the year in
     which it has been in effect for two years.

5.   Subsequent accounting periods shall be successive three year periods ending
     twelve months following the previous accounting period,

6.   Loss ratio means net losses incurred during the accounting period
     (developed for fifteen months following the accounting period) divided by
     net premiums earned during the accounting period.  For Mercury Insurance
     Company and California Automobile Insurance Company the net earned premium
     and net incurred losses shall be combined and the commission rate adjusted
     together.  The loss ratio for Mercury Casualty Company and the Personal
     Protection Package shall be calculated separately and the commission rates
     adjusted separately.

7.   For private, passenger automobile net earned premiums and net incurred
     losses for Bodily Injury, Property Damage, Uninsured Motorist and Medical
     Payments Coverages shall be calculated by the Company based upon a net
     retention of $25,000 per occurrence.  For Personal Protection Package the
     net earned premiums and net incurred losses for all coverages shall be
     calculated by the Company based upon a net retention of $25,000 per
     occurrence for all coverages.  All earned premiums and incurred losses
     shall be net of reinsurance costs and recoveries, assessments for guarantee
     funds and loading for assigned risk plans reinsurance facilities and joint
     underwriting authorities.

8.   The commission rate for Personal Protection Package and Mercury Casualty
     Company private passenger auto policies will be increased when the loss
     ratio for the latest accounting period is 55% or less, and decreased when
     the loss ratio is 60% or more.

9.   The commission rate for Mercury Insurance Company and California Automobile
     Insurance Company will be increased when the loss ratio for the latest
     accounting period is 60% or less, and decreased when the loss ratio for the
     latest accounting period is 65% or more.
<PAGE>
 
10.  Any other change in commission rates are by mutual agreement between the
     Producer and Company.



Executed this         day of              At    Los Angeles, California
             ---------      -------------       -----------------------



By____________________________________    Title_________________________ 
  Mercury Casualty Company
  Mercury Insurance Company
  California Automobile Insurance Company



Producer______________________________    Title_________________________